Chapter1IntroductionOptions,Futures,andOtherDerivatives,8thEditionCopyrightJohnC.Hull2012
Chapter 1 Introduction Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 1
What is a Derivative? A derivative is an instrument whose valuedepends on, or is derived from, the value ofanother asset.Examples: futures, forwards, swaps, options,中exotics...Options,Futures,andOtherDerivatives,8thEdition,CopyrightJohnC.Hull20122
What is a Derivative? A derivative is an instrument whose value depends on, or is derived from, the value of another asset. Examples: futures, forwards, swaps, options, exotics. Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 2
WhyDerivativesAreImportant Derivatives play a key role in transferring risks in theeconomy克The underlying assets include stocks, currenciesinterestrates,commodities,debt instruments,electricity, insurance payouts, the weather, etcMany financial transactions have embeddedderivativesThe real options approach to assessing capitalinvestment decisions has become widely acceptedOptions,Futures,andOtherDerivatives,8thEditionCopyrightJohnC.Hull20123
Why Derivatives Are Important Derivatives play a key role in transferring risks in the economy The underlying assets include stocks, currencies, interest rates, commodities, debt instruments, electricity, insurance payouts, the weather, etc Many financial transactions have embedded derivatives The real options approach to assessing capital investment decisions has become widely accepted Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 3
HowDerivativesAreTradedOn exchanges such as the Chicago Board好OptionsExchangeIn the over-the-counter (OTC) market wheretraders working for banks, fund managersand corporate treasurers contact each otherdirectlyOptions,Futures,andOtherDerivatives,8thEdition,CopyrightJohnC.Hull 20124
How Derivatives Are Traded On exchanges such as the Chicago Board Options Exchange In the over-the-counter (OTC) market where traders working for banks, fund managers and corporate treasurers contact each other directly Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 4
Size ofOTCandExchange-TradedMarkets(Figurel.l,Page3)Sizeof Market700($ trillion)600OTC500Exchange4003002001000Jun-98Jun-99Jun-00Jun-01Jun-02Jun-03Jun-04Jun-05Jun-06Jun-07Jun-08Jun-09Options,Futures,andOtherDerivatives,8thEdition,Copyright5JohnC.Hull2012
Size of OTC and Exchange-Traded Markets (Figure 1.1, Page 3) Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 5