博迪《金融学》课后习题答案-英文ch11_IM_1E.doc

Instructor’s Manual Chapter 11 Page PAGE143 CHAPTER 11 HEDGING, INSURING, AND DIVERSIFYING Objective To explain the various methods and institutional mechanisms for the transfer of risk through the financial system by hedging, insuring, and diversifying. Outline TOC \f11.1 Using Forward and Futures Contracts to Hedge Risk 11.2 Hedging Foreign-Exchange Risk with Swap Contracts 11.3 Hedging Shortfall-Risk by Matching Assets to Liabilities 11.4 Minimizing the Cost of Hedging 11.5 Insuring versus Hedging 11.6 Basic Features of Insurance Contracts 11.7 Financial Guarantees 11.8 Caps and Floors on Interest Rates 11.9 Options as Insurance 11.10 The Diversification Principle 11.11 Diversification and the Cost of Insurance 11.12 The Fallacy of Time Diversification  Summary Market mechanisms for hedging risk exposures are: forward and futures contracts, swaps, and matching assets to liabilities. A forward contract is the obligation to deliver a specified asset at a specified future delivery date at a specified price. Futures contracts are standardized forward contracts that are traded on exchanges. A swap contract consists of two parties exchanging a series of payments at specified intervals over a specified period of time. A swap contract could call for the exchange of almost anything. In current practice, however, most swap contracts involve the exchange of commodities, currencies, or securities. Financial intermediaries such as insurance companies often hedge their customer liabilities by matching their assets to their liabilities. This is done to reduce the risk of a shortfall. When there is more than one way to hedge a given risk exposure, the mechanism chosen should be the one that minimizes the cost of achieving the desired reduction of risk. There is a fundamental difference between insuring and hedging. When you hedge, you eliminate the risk of loss by giving up the potential for gain. When you insure, you pay a premium to eliminate the ris