Pert1: Introduction Hedge Ratio: Call & Put option

● Investment Product consists of traditional (stock, bond,

real estate) & derivative product (option : kalo ga gitu
yakin, forward, futures : kalo udah yakin) (→ structured
notes ; repo & warrant ) Probability ; Call Option Formula
● Contoh soal : *Buyer→ Clearing House→ Seller. Cth:Tokped,shopee
Pohon mangga, 2 bln lgi matang. Total 100 kg @Rp 10k = ● Option Notation
Total harga Rp 1 juta. Dp 5% = Rp 50k. INGAT! ​ Option So,S1 = price of the underlying asset at time 0 (today) and ;
price​ = DP, ​Exercise price​ = hak u/ beli @Rp 10k. time T (Maturity/expiration)
INGAT ! option => penjual yg tanggung resiko, krn X = Exercise price ; Y = Risk Free Rate
Put Formula:
pembeli bisa buy @Rp 10k (harga awal di soal) T = Time to expiration = number of days/365
a) 3 bulan lgi harga @ Rp 10k → ​BEBAS​ exercise c = European call ; C = American call
Pert3: Put Call Parity
atau engga, krn sama2 bisa buy @ Rp 10k p = European put ; P = American put
Long call+Long Bond=Long Put +Long Underlying
b) 3 bulan lgi harga @ Rp 8k → ​JGN PAKE​, karna bisa ● Payoff ; ​KALO BUYER:
Synthetic call+Syn Bond=Syn put +Syn Underlying
beli lebih murah @Rp 8k. Kalo pake malah rugi Rp CT = max ( 0 , ST -X)​ → Pilih angka yang paling gede x
co + (1+r)T = po + so
2k per kg (dari Rp 10k dikurang Rp 8k). Selain itu PT = max ( 0 , X- ST)
Contoh : max (0,120-100) = kan 0 , 20 → pilih 20 Exercise​: European put & call options with an exercise
emang sudah rugi karna udah DP.
price of $45 expire in 115 days.The Underlying is Priced at
c) 3 bulan lgi harga @ Rp 12k → ​WAJIB PAKE, ​karna KALO SELLER :
Call Seller Payoff = - max ( 0 , ST -X) $48 &make no cash payment during the life of option. Risk
lebih untung, bisa beli @Rp 10k padahal harga skrg
Put Seller Payoff = -max ( 0 , X- ST) free rate 4.5%p.a. The Put selling for $8.
@Rp 12k. Klo ga ada duit -> jual opsi
● EXERCISE a.Identify the mispricing bet.actual call & synthetic call
Tau pake opsi / gk gimana? Kalau harganya at least =
1. The underlying is IDX and is at 6000. The exercise price b.perform arbitrage transaction
harga kontrak + Dp ( Dalam kasus ini, harga = harga di opsi
is : a. 5,500 & b.6,500 Diket. So =$48, Co =8.00→ actual, Po 3.75,
+ DP = 10K + 5%*10k = Rp 12k… jadi kalo dibawah 12k
Determine the payoff of call and put - buyer and seller! Rf 4.5%p.a., x= 45, T= 115/365=0.3151
bakal rugi, diatas 12k bakal untung )
→ Call buyer payoff: *kalo T=0 → saat maturity
● Future & Forward mirip. Bedanya, forward → custom,
future → yg beli kontrak yg tanggung resiko, a. Max ( 0,6000-5500) = max (0,500) = 500 a.Synthetic Call (co) c.Synthetic bond x
T
(1+r)
standardized. b. Max (0,6000-6500) = ma (0,-500) = 0 x
co = po + so − (1+r) x
T
(1+r)
T = po + so − co
● Exercise date (Option) : anytime (American Opt) & →Put buyer payoff: 45
3.75 + 48 − (1+0.045)0.3151 =3.75+48-8= 43.75 actual
Specific date (European Opt). Semua ttp ada batas a. Max ( 0, X-ST) = max (0,5500-6000) = 0
b. Max ( 0,6500-6000 ) = max (0,500) = 500 co= 7.37,actual call =8 bond =44.38, Δ = $0.63
maximum (expiry date). Kalo waktu makin panjang -> Δ = $0.63
2. The underlying is a stock priced at $50. A call option undervalue
potensi loss and gain makin besar (u/ call opt.) Undervalue​, so Buy
with an exercise price of $50 is selling for $5. You buy 1 d.Syn underlying (so)
● Type (Option) : Call option (hak u/ membeli) & Put Syn.call, sell actual call x
stock and sell 1 option at expiration, the stock price is so = co + (1+r)T − po
option (hak u/ menjual) b.Synthetic put (po)
a.$40 b.$45 c.$50 d.$55 e.$60 po = co + (1+r)x
T − so
8 + 44.38 − 3.75 = 48.63
Determine total payoff for above strategies: 45 Actual underlying=48
8+ (1+0.045)0.3151
− 48 Δ = $0.63 → ​overvalue
→ ​Total Payoff = Underlying payoff + Option Payoff
po= 4.38,actual put
a. (40-50) + 5 - max (0,40-50) = -10+5-max(0,-10)
=3.75, Δ = $0.63
=-10+5-0 = -5 overvalue
b. (45-50) + 5 - max(0,45-50) = -5+5-0 = 0
c. (50-50) + 5 - max(0,50-50) = 0+5-0 = 5
d. (55-50) + 5 - max(0,55-50) = 5+5-5 = 5
e. (60-50) + 5 - max(0,60-50) = 10+5-10 = 5
3. Equal Problem as no 2, change call into put !
a. (40-50) + 5 - max (0,50-40) =-10+5-10 = -15
b. (45-50) + 5 - max(0,50-45) = -5+5-5 = -5
c. (50-50) + 5 - max(0,50-50) = 0+5-0 = 5
d. (55-50) + 5 - max(0,50-55) = 5+5-0 = 10
e. (60-50) + 5 - max(0,50-60) = 10+5-0 = 15
4. Equal problem, sell stock, buy call
● Kegunaan opsi → hedging (reduce risk) a. (50-40) - 5 + max (0,40-50) =10-5+0 = 5
Misal, untuk ​restruktur portofolio dg cara tradisional : b. (50-45) - 5 + max(0,45-50) = 5-5+0 = 0
100% saham dan 0% cash diubah jadi 80% saham dan 20% c. (50-50) - 5 + max(0,50-50) = 0-5-0 = -5
cash karna kt pikir saham akan turun. Ketika tryt tidak d. (50-55) - 5 + max(0,55-50) = -5-5+5 = -5
turun, kita akan rugi (bid ask spread), dan market akan e. (50-60) - 5 + max(0,60-50) = -10-5+10 = -5
kena impact. Kalau ​dg derivative ​bs pake opsi untuk 5. Equal problem, sell stock, buy put
restruktur. Kalo liat harga mau turun bisa beli put option. a. (50-40) - 5 + max (0,50-40) = 10-5+10 = 15
Supaya kalo turun bisa jual dg harga sama. Hal ini jg b. (50-45) - 5 + max(0,50-45) = 5-5+5 = 5
menyebabkan impact ke market lbh kecil. c. (50-50) - 5 + max(0,50-50) = 0-5+0 = -5
d. (50-55) - 5 + max(0,50-55) = -5-5+0 = -10
Pert2: e. (50-60) - 5 + max(0,50-60) = -10-5+0 = -15
● Option Market Credit RIsk ● Minimum Value of Any Option
1. Over the Counter ​ c0 ≥ 0 ; Co ≥ 0 ; p0 ≥ 0 ; Po ≥ 0
● Maximum Value Call Option ​ co ≤ so ; ​ ​ ​ ​ Co ≤ so
● Maximum Value of Put Option
po ≤ (1+Yx )T ; P o ≤ X One Period Binomial Pricing
*​Put option American pasti lebih besar daripada put
*Kondisi diatas disebut resiko unilateral. Bilateral itu kalo option european karena American kapanpun bisa dijual.
​ ption Exchange
dua-duanya bisa rugi. O European nilainya lebih kecil karena ada discount rate.
2. Option Exchange Dieksekusi hanya pas jatuh tempo. (Waktu ada nilainya)
 Transaksi = investor dpt 42600 di awal, bayar 44500 di Binomial → continuous → distribusi normal
akhir dengan r=4.46% sdgkan rf=7% Tabel ​Hedge results in the two-period binomial model
Sama aja kek LOAN, jdi ada borrowing opportunity
jadi dia bisa pinjem sebesar 42600 AT RISK FREE RATE

u= up move= S + /s ; ​ ​d= down move= S − /s Two Period Binomial Option Pricing (kerjain dari kanan
Estimating profitability up move and down move ke kiri !)
Up move Probability = π = ((1+r)−d)u−d
Down move Probability= 1 − π Soal bapaknya:
+ −
Call Price risk neutral probability = C = π.C +1+r(1−π)C 1. prnyataan mn yg salah? a., prnyataan yg bner b
Problems 1:​ Suppose the underlying is a non dividend a. Harga saham diatas harga exercise, call option buyer
paying stock currency valued at $50. It can go up by 25% mendapat keuntungan yg lebih besar dr kerugian call
or go down by 20%. x=$50, r=7%p.a. option seller -> salah karena call option seller kan ga
untung.
b. pd harga saham dibawah harga exercise, call option
π= (1+3.44%) −0.894 buyer mendapat kerugian dr keuntungan call option seller
1.118−0.8944 = 0.626, 1- π =0.374
-> jwbn yg bener
C = (π. C++) +1+r
+ (1−π) . C+−
= ((0.626 x(1+3.44%)
12.5)+(0.374 x 0))
=7.564
− (π. C+−) + (1−π) . C−− ((0.626 x 0)+(0.374 x 0))
c. pd harga saham diatas harga exercise, call option buyer
π = ((1+7%)−0.8)
1.25−0.8 =0.6 ​Call Option Price C = 1+r = (1+3.44%) =0 mendapat keuntungan lebih besra dr kerugian call option
((0.6 x 12.5)+(0.4 x 0))
1 − π = 0.4 c= 1.07 = 7.01 C = (π. C+) +1+r
(1−π) . C−
= ((0.626 x (1+3.44%)
7.564)+(0.374 x 0))
=4.58 seller -> salah
2.saham abc dibeli $100/lembar, khawatir akan turun,
Problems 2: Equal Problem as no 1 but, rf=8%, x=$70 Pert 4: HEDGING RATIO apakah tindakan yg tidak tepat?
i​. menjual put option -jwbn ga tepat
ii. menjual call option-bener karna ga akan di exercise jd
jual aja
iii. membeli put option-bener
3. kalau ada saham ABC yang diperkirakan stagnan
strategy yang paling baik apa ? a. sell stock, buy call, b.
sell stock, buy put, c. buy stock, sell put, d. sell stock, sell
π = ((1+8%)−0.78)
1.3−0.78 =0.5769 call. jawabannya ​D​. sell sama sell soalnya saham nya
1 − π = 0.4231 stagnan jadi gak berguna buat di beli
​Call Option Price 4. Yg mana itu rumus put call parity? ... Long call+Long
C = ((0.5767 x 14.5)+(0.4231
1.08
x 0))
=7.75 Problem 1 outlay (actual call price = $8) Bond=Long Put +Long Underlying
Put Option Price N = (c​+​-c​-​) /(s​+​-s​--​) = (12.5 - 0) / (62.5-40)=0.556
P = ((0.5767 x 0)+(0.4231
1.08
x 19.30))
=7.56 Suppose we sell 1000 call, buy 556 underlying.
Initial outlay = 556(50)-1000(8) = $19,800
The Binomial Model One period later
Rf = d<1+r<u​2 H​+​= ns​+ ​- c​+​ = 556 (62.50) - 1000(12.50) = $22,250
Hedge ratio = h = ( C + - C − )/(S+ - S-) H​-​=ns​-​-c​-​=556(40)-1000(0)=$22,240
The hedge requires h shares of stock for each call. Return =( $22,250/$19.890) - 1 = 12.37%
Contoh : (H​+​=H​-​, beda dkit karna pembulatan blh, mo pake yg mn aj
S=100; X=100; +25%; -20%, Rf=7% blh, n=hedging ratio. Itung dlu angkanya baru tau
h= (25-0)/(125-100) = 0,556 inlay/outlay)
# of shares = 556 Problem 2 inlay (actual call price $6)
kondisi awal Actual call price c=$6
Short (sell)call = 1000 @ $14.02 & Long(buy) Stock = 556 Buy 1000 call, sell 556 underlying
@ $100 Current value = 556(100)-1000(14.02)=41,580 Initial Inlay = -1000(6)+556(50) = +$21,800
Hedge portfolio​ = return sama dengan rf (RISKLESS) Borrowing cost = $22,250/$21,800-1=2.06%, Rf=7%.
-kalo diitung pake pohon binomial, return yang dihasilkan Problem 3. Two Period Actual Call = $10
semua akan sama dengan rf = 7%
-over/under priced cal bisa dilihat dari call price
IF S=$125 maka C+ = 25 = (125-100)
Value = 556(100)-1000(25)= $44500
r= 44500/41580 = 0.07
Overpriced call : cari yang lebih murah di market
IF C= $15 (at market price)
Value of inv = 556(100)-1000(15) = $40600
If S=125 (naik dari 100), maka :
C+ = (π. C++) + (1−π) . C+−
1+r = ((0.6 x28.125)+(0.4
(1+7%)
x 0))
=15.771
r= (44500/40600)-1 = 0.096 = 9,6%
− (π. C+−) + (1−π) . C−− ((0.6x 0)+(0.4 x 0))
r > rf, execute at $15, jadi investor ​borrow at rf​ sebesar C = 1+r = (1+7%) =0
$40600 yang nantinya akan naik valuenya jadi $44500. C = (π. C+) +1+r
(1−π) . C−
= ((0.6 x 15.771)+(0.4
(1+7%)
x 0))
=8.8435
Underpriced call: (if underprice, you have to buy it) (C++) −( C+−) 28.125−0
n += (s++)−(S+−) = (78.125−0) =1 (100% hedging)
To hedge long(buy) option, investor must sell the stock
n −= (C+−) −( C−−) 0−0
(s+−)−(S−−) = (50−32) = 0
short !
(C+) − (C−) 15.771−0
IF C=$13; S=100; current value = $42,600 n = (S+) − (S−) = (62.5−40) =0.7009 (partial hedging)
IF S+=$125; value = - (556($125)-1000($25))= -$44500 *​klo n ke n+ hrs hedging 100%, kn itu baru 0.701, hrs
F S-=$80; value = (556($80))= $44480 ditambahin (1-0.701)=0.299 trs kali 1000 call baru kali sm
underlying + 1000 call kali actual call price buat cr inlay