Page 42 FINANCIAL
Financial Options
FY11 FY10
Type
Number of
Contracts
Notional
Principal
Number of
Contracts
Notional
Principal
Equity Options
Equity index put options - purchased 1,948 $1,573,087 540 $581,508
Equity index put options - written - - (423) 1,716,534
Currency Forward Options
Currency forward call options - purchased 6 2,061,970 - -
Currency forward put options - written 4 399,912 2 6,610,384
Currency forward put options - purchased 4 6,062,074 4 8,478,138
Inflation Options
Inflation put options - written 12 22,600,000 10 35,100,000
Options on Futures
Fixed income call options on futures USD (183) 7,510,485 155 2,653,280
Fixed income put options on futures USD (531) 31,075,645 19 146,336,425
Fixed income call options on futures (non-dollar) - - 449 1,358,451
Cash equivalent call options on futures
(non-dollar) - purchased - - 191 -
Cash equivalent put options on futures
(non-dollar) - - 1,096 156,058,536
Swaptions
Objective: Swaptions are options on swaps that give the purchaser the right, but not the obligation, to enter
into a swap at a specific date in the future. An interest-rate swaption gives the buyer the right to pay or receive
a specified fixed rate in a swap in exchange for a floating rate for a stated time period. TRS has both writ-ten
and purchased interest rate swaptions in its portfolio. In a written call swaption, the seller (writer) has the
obligation to pay a fixed rate in exchange for a floating rate for a stated period of time and in a written put
swaption, the seller has the obligation to receive a fixed rate in exchange for a floating rate if the swaption is
exercised. A purchased (long) call swaption gives the buyer the right to receive a fixed rate in exchange for
a floating rate for a stated period of time while a purchased (long) put swaption gives the buyer the right to
pay a fixed rate in exchange for a floating rate if the swaption is exercised.
The TRS investment portfolio also holds credit default swaptions. A credit default swaption gives the holder the
right, but not the obligation to buy (call) or sell (put) protection on a specified entity or index for a specified
future time period.
As the writer of a swaption, TRS receives a premium at the outset of the agreement. Premiums are recorded as
a liability when the swaption is written.
Terms: As of June 30, 2011, TRS had outstanding written call swaption exposure of $51,768,599, written put
swaption exposure of $29,617,776, purchased put swaption exposure of $1,838,773, and purchased call
swaption exposure of $16,918,835. The contracts have various maturity dates through November 2020. As
of June 30, 2010, TRS had outstanding written call swaption exposure of $10,012,297, written put swaption
exposure of $2,470,457, and purchased put swaption exposure of $36,390,000. Exposure amounts for swap-tions
do not represent the actual values in the Statement of Plan Assets.
Fair Value: Fluctuations in the fair value of swaptions are recognized in TRS’s financial statements as incurred
rather than at the time the swaptions are exercised or when they expire. As of June 30, 2011, and June 30, 2010,
the fair value of swaption contracts was $981,152 and ($3,773,423), respectively.
