标题: speculator, hedger and arbitrager? [打印本页] 作者: water2012 时间: 2011-7-11 17:40 标题: speculator, hedger and arbitrager?
can anyone explain the difference between these three?
Textbook says speculators use futures contracts to gain exposure to changes in the price of the asset underlying a futures contract.
A hedger will use futures contracts to reduce exposure to price changes in the asset.
not sure about what does this mean?作者: Siddimaula 时间: 2011-7-11 17:40
a speculator would typical buy an option without owning the underlying asset/security. if the option ends up in the money, the speculator would take the profit. otherwise let it expire worthless.
a hedger usually owns a security and wants to protect their postion from a downward movement of the market, or they want to take the profit without selling the security. they use put option/ short futures to do that, so any loss from downward movement of the security is compensated by gain in the option/future contract. this effectively "locks" price of a secuirty at the strick price of the option.作者: Finalnub 时间: 2011-7-11 17:40
an arbitrager finds identical cash flow streams (bond, security, physical goods), and if the market pricing of these identical cash flow is different. an arbitrage would take a profit from that until the price and PV reach equilibrium
for example, a 10- year bond that pays with 10% coupon is priced at 100 dollars. at the same time, a prefer share that pays 10 dollars in dividend annually is priced at 99 dollars. an arbitrager would buy the preferred share and issue a 10 year bond at the same time, and the profit from that would be 1 dollar difference between the price of the bond and the preferred share that would give the same cash flow over 10 years.
