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Derivatives Formulas

The document provides a comprehensive list of financial formulas related to forward and futures contracts, including payoffs, margin calculations, and present/future value equations. It also covers concepts such as cost of carry, basis, hedge ratios, and portfolio hedging strategies. Each formula is clearly defined, making it a useful reference for financial analysis and trading strategies.

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hariom.patel
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2 views4 pages

Derivatives Formulas

The document provides a comprehensive list of financial formulas related to forward and futures contracts, including payoffs, margin calculations, and present/future value equations. It also covers concepts such as cost of carry, basis, hedge ratios, and portfolio hedging strategies. Each formula is clearly defined, making it a useful reference for financial analysis and trading strategies.

Uploaded by

hariom.patel
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Topic Formula

Long Forward Payoff (S − K) × Q

Short Forward Payoff (K − S ) × Q

Daily Price Change ΔP = P − P ₋₁

Long Futures MTM ΔP × Lot Size × Contracts

Short Futures MTM −ΔP × Lot Size × Contracts

Contract Value Price × Lot Size × Contracts

Initial Margin Margin % × Contract Value

Maintenance Margin Maintenance % × Initial Margin

Margin Deposit Initial Margin − Current Balance

Total Gain/Loss Closing Balance − (Initial Margin + Deposits


− Withdrawals)

Future Value (Discrete) PV(1+r/m)ᵐᵀ

Present Value (Discrete) FV/(1+r/m)ᵐᵀ

Future Value (Continuous) PVeʳᵀ


Present Value (Continuous) FVe⁻ʳᵀ

Effective Annual Rate (1+r/m)ᵐ − 1

Effective Annual Rate (Continuous) eʳ − 1

Nominal from EAR m[(1+EAR)^(1/m) − 1]

EAR → Continuous ln(1+EAR)

Nominal → Continuous m ln(1+r/m)

Continuous → Nominal m(e^(r/m) − 1)

Cost of Carry Financing Cost + Storage Cost −


Income/Benefits

Forward/Futures (No Income) F₀ = S₀eʳᵀ

Known Cash Income F₀ = (S₀ − I)eʳᵀ

PV of Dividend De⁻ʳᵗ

PV of Multiple Dividends ΣDᵢe⁻ʳᵗⁱ

Known Dividend Yield F₀ = S₀e^(r−q)ᵀ

Currency F₀ = S₀e^(r−rf)ᵀ
Commodity (Fixed Storage) F₀ = (S₀ + U)eʳᵀ

Storage Cost PV U = Future Storage × e⁻ʳᵀ

Commodity (Storage %) F₀ = S₀e^(r+u)ᵀ

Commodity + Convenience Yield F₀ = S₀e^(r+u−y)ᵀ

Implied Convenience Yield y = r + u − ln(F₀/S₀)/T

Long Forward Value f = S − Ke⁻ʳᵀ

Short Forward Value f = Ke⁻ʳᵀ − S

Basis Basis = Spot − Futures

Effective Price F₁ + b₂

Hedge Ratio h = ρ(σ /σf)

Number of Contracts N = h × (Exposure/Contract Size)

Futures Contract Value Vf = Futures Price × Multiplier

Portfolio Hedge N = β(Vₐ/Vf)

Change Portfolio Beta N = (βᵢ − β )(Vₐ/Vf)


FRA Settlement [(R − R )LT] / (1 + R T)

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