Chapter 4 Interest rates Options, Futures, and Other Derivatives 8th Edition Copyright o John C Hull 2012
Chapter 4 Interest Rates Options, Futures, and Other Derivatives 8th Edition, Copyright © John C. Hull 2012 1
Types ofrates Treasury rates e LIBOR rates Repo rates Options, Futures, and other Derivatives 8th Edition Copyright O John C Hull 2012
Types of Rates Treasury rates LIBOR rates Repo rates Options, Futures, and Other Derivatives 8th Edition, Copyright © John C. Hull 2012 2
Treasury Rates o Rates on instruments issued by a government in its own currency Options, Futures, and other Derivatives 8th Edition Copyright O John C Hull 2012 3
Treasury Rates Rates on instruments issued by a government in its own currency Options, Futures, and Other Derivatives 8th Edition, Copyright © John C. Hull 2012 3
lBOR and BD e liBOR is the rate of interest at which a bank is prepared to deposit money with another bank. (The second bank must typically have a aa rating) LIBOR is compiled once a day by the british Bankers association on all major currencies for maturities up to 12 months o LIBid is the rate which a aa bank is prepared to pay on deposits from anther bank Options, Futures, and other Derivatives 8th Edition Copyright O John C Hull 2012
LIBOR and LIBID LIBOR is the rate of interest at which a bank is prepared to deposit money with another bank. (The second bank must typically have a AA rating) LIBOR is compiled once a day by the British Bankers Association on all major currencies for maturities up to 12 months LIBID is the rate which a AA bank is prepared to pay on deposits from anther bank Options, Futures, and Other Derivatives 8th Edition, Copyright © John C. Hull 2012 4
R epo rates Repurchase agreement is an agreement Where a financial institution that owns securities agrees to sell them today for X and buy them bank in the future for a slightly higher price, Y e The financial institution obtains a loan e The rate of interest is calculated from the difference between x and y and is known as the repo rate Options, Futures, and other Derivatives 8th Edition Copyright O John C Hull 2012 5
Repo Rates Repurchase agreement is an agreement where a financial institution that owns securities agrees to sell them today for X and buy them bank in the future for a slightly higher price, Y The financial institution obtains a loan. The rate of interest is calculated from the difference between X and Y and is known as the repo rate Options, Futures, and Other Derivatives 8th Edition, Copyright © John C. Hull 2012 5