Clase 6 curso 2013-2014 - Forwards

En las últimas dos clases hemos estado revisando como se valoran forwards y futuros. 

La base que utilizamos en la valoración es la asunción de "no-arbitraje". Esta asunción nos permite determinar el precio de los forwards/futuros asegurando que, si está caro, el Mercado arrastrará el precio abajo, mientras que, si está barato, el mercado llevara el precio hacia arriba.

Como hemos visto durante estos días, cuando hay costes (el coste de oportunidad que representa el tipo de interés, el coste de almacenamiento en los commodities...), el precio Spot se capitaliza a esos costes; cuando hay rendimientos (dividendos, cupones de bonos, rendimientos de conveniencia, el tipo de interés en otra moneda...), el precio Spot se descuenta a esos rendimientos.

He incorporado una hoja Excel en la que podéis ver cómo valorar un forward de divisa asumiendo que no hay arbitraje posible.

La última presentación que hemos revisado en clase podéis encontrarla aquí.

Seminario de casos en finanzas

Desde el departamento se va a poner en marcha un seminario de casos en finanzas, que empezará el miércoles 9 de octubre.

El seminario consta de dos partes, una dirigida a todos los alumnos que cursan tercero, y otra más específica dirigida a los alumnos de cuarto y quinto (sobre todo de itinerario financiero).

El seminario tiene la finalidad de presentar a los alumnos casos específicos del mundo financiero, de actualidad y relevantes, que no entran directamente en las asignaturas del itinerario o que son transversales e interesan a varias asignaturas.

Los alumnos se llevaran a casa un “hago constar” de asistencia y aprovechamiento del seminario otorgado por las facultades respectivas (depende del plan de estudios en el que estén). Para ello tendrán que asistir a 4 de las 5 sesiones.

Os dejo una presentación de resumen.

Clase 25/09/2013 cancelada

Lamentablemente, tengo que cancelar la clase de mañana. Disculpad las molestias. 

Clase 5 curso 2013-2014 - Coberturas y tipos de interés

En el día de hoy, dividimos la clase en dos partes:

- Durante la primera parte, revisamos los ejercicios que había pendientes. He publicado mi solución en la pestaña 'Ejercicios'. Los ejercicios tenían que ver con la forma de cubrirse con futuros y con los resultados de estas coberturas (qué pasa si la cobertura no es perfecto, qué pasa si sobrecubro, qué ocurre si cubro con futuros de IBEX en vez de futuros del Mini IBEX).

- En la segunda parte , comenzamos a ver cómo valorar futuros y forwards: vimos qué es 'ponerse corto' de una acción, qué distintos mercados de tipos de interés existen, cómo funcionan los tipos LIBOR y cómo afecta la composición a los tipos de interés. Recordad que durante el curso asumiremos composición continua. En general, en los derivados no colateralizados utilizaremos para el descuento la curva LIBOR y en los derivados colateralizados usaremos la curva EONIA.
 
Os dejó la presentación aquí.

Ejercicios 1 curso 2013 - 2014

Como comentamos en clase, os adjunto los ejercicios que habrá que entregar por email a mi dirección antes del lunes a las 8:30.

Ejercicio 1.- Un amigo suyo debe adquirir una cartera con muchas empresas energéticas y valorada en 100.000€; está preocupado con la dirección que tomará el mercado y piensa si cubrir parcialmente sus riesgos. El futuro del índice IBEX-35 está en 8900 puntos y la beta de la cartera es 1,2. ¿Qué cobertura le recomendaría usted? Revise la descripción del Futuro normal y del Futuro Mini  en MEFF para determinar con cuál es más acertado cubrir.

Ejercicio 2.- Un fabricante de tubos de cobre sabe que va a necesitar 100,000 libras de cobre para el 1 de diciembre de 2013. El precio spot es de 340cents / Libra. El futuro cotiza a 320cents / Libra. Cada contrato es de 25,000 Libras. ¿Qué estrategia hay que seguir para cubrirse? ¿Qué ocurre a vencimiento? ¿Qué piensa que es mejor, comprar en Spot o comprar por medio del Futuro? Asuma que no se se producirá entrega física del subyacente, se liquidará el contrato de futuro por diferencias.

Clase 3 y 4 curso 2013-2014 - Mercados de Futuros y Coberturas

Durante la tercera clase de este año estuvimos viendo algunas de las características de los Mercados en los que se cotizan los productos derivados. La más importante, y la que diferencia a los Mercados OTC de los Mercados Organizados, es la existencia de un margen diario que asegura a las contrapartidas contra un posible “default” de la contrapartida.

Vimos, igualmente que hay bastantes elementos a determinar cuando se está definiendo un contrato de futuro: el activo subyacente, el tamaño, cómo será la cotización, límites de precios, límites de posición…

Introdujimos la primera situación en la que el arbitraje nos ayudaba a determinar cómo debía comportarse el precio de un activo: para que no exista arbitraje, el precio del futuro y del activo deben converger a vencimiento.

En términos de regulación, destacamos la normativa EMIR, de reciente creación, que está obligando a muchas contrapartidas a negociar sus derivados a través de Mercados Organizados.

Durante la cuarta clase vimos que hay tres tipos de actores en el Mercado: coberturistas, especuladores y arbitrajistas. Nos centramos en la operativa de los coberturistas, que utilizan los derivados para fijar el precio de la producción o de algunas materias primas. Estudiamos cómo realizando una operación en el Mercado del activo y otra en el Mercado de Futuros podíamos cubrir nuestra posición.

Vimos que no todas las coberturas son perfectas. De hecho vimos cómo realizar un análisis de correlación para determinar el número de contratos a comprar/vender, cuando el futuro y el activo no tienen un “match” perfecto. Posteriormente, vimos cómo extender este tipo de análisis al caso de un portfolio de Equity y usarlo para aumentar o disminuir la Beta de un Portfolio.

Podéis encontrar las presentaciones aquí y aquí.

Clase 2 curso 2013-2014 - Intro a Derivados

Hoy hemos revisado algunos conceptos básicos sobre derivados.

- Iniciamos la presentación comentando brevemente la opinión de los derivados de Warren Buffet. Hay problemas contables, de liquidez, de contrapartida... pero son instrumentos muy importantes para cubrir distintos tipos de riesgos.

- Hemos visto qué es un derivado, en qué mercados se negocian y qué características tienen esos mercados.

- Hemos diferenciado entre forwards y futuros y hemos visto cómo cotizan en mercado (precio alto y bajo)

- La opciones son otro instrumento derivado que hemos visto: diferencia entre call y put, vanilla y exótica, europea y americana...

- Finalmente, hemos visto algunas características básicas de las permutas (tipos de interés, divisa y CDS).

La presentación que hemos visto hoy está aquí.

Clase 1 curso 2013-2014 - Intro

Bienvenidos a la asignatura de Derivados 2013-2014!!!

Forma de contacto.

- La mejor forma de contactarme es a través de email en  cueto.josemanuel at gmail.com

- Esta página, derivados101.blogspot.com.es, servirá como vehículo de transmisión de la clase. Las presentaciones, ejercicios, modificaciones de aula, etc. las iré publicando en ella.

Horario de Clases.

Las clases tendrán lugar en el aula O-102; si hubiera cualquier cambio, os lo comunicaría con la mayor antelación posible. El horario de clases será:

- Lunes: 8.30 - 10.00

- Miércoles: 8.00 - 10.00 (suelo juntar las clases)

- Al principio de cada clase haremos un pequeño comentario de Mercado.

Evaluación.

- Examen: 70% (el examen cubrirá lo que veamos en clase; los libros son sólo de referencia). El examen será tipo test, 20 preguntas, cuatro alternativas por pregunta, las respuestas equivocadas no restan. Las preguntas podrán ser meramente teóricas o prácticas. Podéis ver el examen del año pasado navegando por la página.

- Caso en grupo: 20%. Consiste en una inversión de 500.000€ en derivados financieros que se negocien en mercados españoles. Vosotros elegiréis esos derivados financieros y cómo distribuís el dinero. Se entregan dos informes:

o   En el primero, comentaréis vuestra estrategia y justificaréis vuestra decisión acerca de los activos elegidos. Hay que hacer constar a través de qué intermediarios financieros vais a operar y cuál es el coste de las comisiones.

o   En el informe final con el resultado de vuestra estrategia. El informe final se expondrá en clase.

      - Ejercicios en clase: 10%. Habrá una serie de ejercicios semanales a entregar antes de la siguiente clase.

Bibliografía (reitero una vez más que el examen cubrirá lo que veamos en clase; la bibliografía es complementaria).

- Options, Futures and Other Derivatives. John Hull. Pearson, 2011.

- Introducción A Los Mercados De Futuros Y Opciones. John Hull. Pearson, 2011.

- Paul Wilmott on Quantitative Finance. Paul Wilmott. John Wiley & Sons Ltd, 2006.

- An Introduction to the Mathematics of Financial Derivatives (Academic Press Advanced Finance). Salih N. Neftci . Academic Press Inc., 2000.

- Swaps and other derivatives. Richard R. Flavell. John Wiley & Sons Ltd, 2010.

- Counterparty Credit Risk and Credit Value Adjustment.  Jon Gregory. John Wiley & Sons Ltd, 2012.

- My Life as a Quant: Reflections on Physics and Finance. Emanuel Derman. John Wiley & Sons Inc., 2004.

Temario.

Como hemos comentado en la clase, vamos a cubrir cuatro bloques:

- Introducción a los derivados financieros.  ¿Qué son? ¿Para qué se utilizan? ¿Cuáles son los principales derivados y cuáles son sus pay-offs? ¿En qué mercados se negocian? ¿Cuáles son los principales activos subyacentes?

- Futuros/Forwards (Septiembre). ¿Cómo podemos cubrirnos con futuros? ¿Qué pasa si no hay un futuro adecuado para mi subyacente? ¿Cómo se valoran los futuros?

- Opciones (Octubre). ¿Cómo funcionan las opciones?¿Cómo funciona la valoración a través de árboles binomiales? ¿Qué son las griegas y para qué sirven?

- Permutas (Noviembre). Aquí cubriremos: swaps de tipo de interés, Cross Currency Swaps (o permutas de divisa) y CDS (Credit Default Swaps o permutas de crédito).

Os incluyo más abajo un extracto de la carta a inversores de Berkshire Hathaway en 2002. En ella, Warren Buffet expone su opinión acerca de los productos derivados. Comentaremos en la próxima clase.

_______________________________

Derivatives

Charlie and I are of one mind in how we feel about derivatives and the trading activities that go with them: We view them as time bombs, both for the parties that deal in them and the economic system. Having delivered that thought, which I'll get back to, let me retreat to explaining derivatives, though the explanation must be general because the word covers an extraordinarily wide range of financial contracts.

Essentially, these instruments call for money to change hands at some future date, with the amount to be determined by one or more reference items, such as interest rates, stock prices or currency values. If, for example, you are either long or short an S&P 500 futures contract, you are a party to a very simple derivatives transaction – with your gain or loss derived from movements in the index. Derivatives contracts are of varying duration (running sometimes to 20 or more years) and their value is often tied to several variables.

Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counterparties to them. In the meantime, though, before a contract is settled, the counterparties record profits and losses – often huge in amount – in their current earnings statements without so much as a penny changing hands.

The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen). At Enron, for example, newsprint and broadband derivatives, due to be settled many years in the future, were put on the books. Or say you want to write a contract speculating on the number of twins to be born in Nebraska in 2020. No problem – at a price, you will easily find an obliging counterparty.

When we purchased Gen Re, it came with General Re Securities, a derivatives dealer that Charlie and I didn't want, judging it to be dangerous. We failed in our attempts to sell the operation, however, and are now terminating it. But closing down a derivatives business is easier said than done. It will be a great many years before we are totally out of this operation (though we reduce our exposure daily). In fact, the reinsurance and derivatives businesses are similar: Like Hell, both are easy to enter and almost impossible to exit. In either industry, once you write a contract – which may require a large payment decades later – you are usually stuck with it. True, there are methods by which the risk can be laid off with others. But most strategies of that kind leave you with residual liability.

Another commonality of reinsurance and derivatives is that both generate reported earnings that are often wildly overstated. That's true because today's earnings are in a significant way based on estimates whose inaccuracy may not be exposed for many years. Errors will usually be honest, reflecting only the human tendency to take an optimistic view of one's commitments. But the parties to derivatives also have enormous incentives to cheat in accounting for them. Those who trade derivatives are usually paid (in whole or part) on "earnings" calculated by mark-to-market accounting. But often there is no real market (think about our contract involving twins) and "mark-to-model" is utilized. This substitution can bring on large-scale mischief. As a general rule, contracts involving multiple reference items and distant settlement dates increase the opportunities for counterparties to use fanciful assumptions. In the twins scenario, for example, the two parties to the contract might well use differing models allowing both to show substantial profits for many years. In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.

Of course, both internal and outside auditors review the numbers, but that's no easy job. For example, General Re Securities at yearend (after ten months of winding down its operation) had 14,384 contracts outstanding, involving 672 counterparties around the world. Each contract had a plus or minus value derived from one or more reference items, including some of mind-boggling complexity. Valuing a portfolio like that, expert auditors could easily and honestly have widely varying opinions. The valuation problem is far from academic: In recent years, some huge-scale frauds and near-frauds have been facilitated by derivatives trades. In the energy and electric utility sectors, for example, companies used derivatives and trading activities to report great "earnings" – until the roof fell in when they actually tried to convert the derivatives-related receivables on their balance sheets into cash. "Mark-to-market" then turned out to be truly "mark-to-myth."

I can assure you that the marking errors in the derivatives business have not been symmetrical. Almost invariably, they have favored either the trader who was eyeing a multi-million dollar bonus or the CEO who wanted to report impressive "earnings" (or both). The bonuses were paid, and the CEO profited from his options. Only much later did shareholders learn that the reported earnings were a sham.

Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for completely unrelated reasons. This pile-on effect occurs because many derivatives contracts require that a company suffering a credit downgrade immediately supply collateral to counterparties. Imagine, then, that a company is downgraded because of general adversity and that its derivatives instantly kick in with their requirement, imposing an unexpected and enormous demand for cash collateral on the company. The need to meet this demand can then throw the company into a liquidity crisis that may, in some cases, trigger still more downgrades. It all becomes a spiral that can lead to a corporate meltdown.

Derivatives also create a daisy-chain risk that is akin to the risk run by insurers or reinsurers that lay off much of their business with others. In both cases, huge receivables from many counterparties tend to build up over time. (At Gen Re Securities, we still have $6.5 billion of receivables, though we've been in a liquidation mode for nearly a year.) A participant may see himself as prudent, believing his large credit exposures to be diversified and therefore not dangerous. Under certain circumstances, though, an exogenous event that causes the receivable from Company A to go bad will also affect those from Companies B through Z.

History teaches us that a crisis often causes problems to correlate in a manner undreamed of in more tranquil times. In banking, the recognition of a "linkage" problem was one of the reasons for the formation of the Federal Reserve System. Before the Fed was established, the failure of weak banks would sometimes put sudden and unanticipated liquidity demands on previously-strong banks, causing them to fail in turn. The Fed now insulates the strong from the troubles of the weak. But there is no central bank assigned to the job of preventing the dominoes toppling in insurance or derivatives. In these industries, firms that are fundamentally solid can become troubled simply because of the travails of other firms further down the chain. When a "chain reaction" threat exists within an industry, it pays to minimize links of any kind. That's how we conduct our reinsurance business, and it's one reason we are exiting derivatives.

Many people argue that derivatives reduce systemic problems, in that participants who can't bear certain risks are able to transfer them to stronger hands. These people believe that derivatives act to stabilize the economy, facilitate trade, and eliminate bumps for individual participants. And, on a micro level, what they say is often true. Indeed, at Berkshire, I sometimes engage in large-scale derivatives transactions in order to facilitate certain investment strategies.

Charlie and I believe, however, that the macro picture is dangerous and getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one other. The troubles of one could quickly infect the others. On top of that, these dealers are owed huge amounts by non-dealer counterparties. Some of these counterparties, as I've mentioned, are linked in ways that could cause them to contemporaneously run into a problem because of a single event (such as the implosion of the telecom industry or the precipitous decline in the value of merchant power projects). Linkage, when it suddenly surfaces, can trigger serious systemic problems.

Indeed, in 1998, the leveraged and derivatives-heavy activities of a single hedge fund, Long-Term Capital Management, caused the Federal Reserve anxieties so severe that it hastily orchestrated a rescue effort. In later Congressional testimony, Fed officials acknowledged that, had they not intervened, the outstanding trades of LTCM – a firm unknown to the general public and employing only a few hundred people – could well have posed a serious threat to the stability of American markets. In other words, the Fed acted because its leaders were fearful of what might have happened to other financial institutions had the LTCM domino toppled. And this affair, though it paralyzed many parts of the fixed-income market for weeks, was far from a worst-case scenario. One of the derivatives instruments that LTCM used was total-return swaps, contracts that facilitate 100% leverage in various markets, including stocks. For example, Party A to a contract, usually a bank, puts up all of the money for the purchase of a stock while Party B, without putting up any capital, agrees that at a future date it will receive any gain or pay any loss that the bank realizes. Total-return swaps of this type make a joke of margin requirements. Beyond that, other types of derivatives severely curtail the ability of regulators to curb leverage and generally get their arms around the risk profiles of banks, insurers and other financial institutions. Similarly, even experienced investors and analysts encounter major problems in analyzing the financial condition of firms that are heavily involved with derivatives contracts. When Charlie and I finish reading the long footnotes detailing the derivatives activities of major banks, the only thing we understand is that we don't understand how much risk the institution is running.

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.

Charlie and I believe Berkshire should be a fortress of financial strength – for the sake of our owners, creditors, policyholders and employees. We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.