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ECO3420 (2002-03)
Course: ECON 3420, Spring 2011School: The Chinese University...
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The Chinese University of Hong Kong - ECON - 3420
ECO 3420 Financial EconomicsFinal Examination (2010-11 Term 1) (Closed-Book)Always explain your answer clearly and completely. Credits are given to concise andwell-presented answers. Provide diagrams wherever appropriate.Time allowed = 90 minutes. Ans
The Chinese University of Hong Kong - ECON - 3420
ECO 3420B Financial EconomicsFinal Examination (2010-11 Term 2) (Closed-Book)Always explain your answer clearly and completely. Credits are given to concise andwell-presented answers. Provide diagrams wherever appropriate.Time allowed = 90 minutes. An
The Chinese University of Hong Kong - ECON - 3420
ECO 3420A Financial Economics - AnswersMidterm Quiz (2011-12 Term 1) (Closed-Book)Time allowed = 40 minutes. Answer all eight questions.Section 1 Multiple Choice (Eleven questions, 5 marks each. Choose the best optionand indicate it in the space provi
The Chinese University of Hong Kong - ECON - 3420
1. Risk:A<B<CMean return:A<B<CAsset A has the lowest risk. It is because the bond is issued by the Chinesegovernment. The probability that the Chinese government goes bankrupt is very low.Even if the government does not have sufficient money to repa
The Chinese University of Hong Kong - ECON - 3420
ECON 3420A Financial Economics2010-2011 Term 1Discussion 2: Capital Asset Pricing Model (CAPM)1.Recall the PV rule of investment decision. Extend that rule to investment decisionsunder risk, in the light of the CAPM.The PV rule for investment decisi
The Chinese University of Hong Kong - ECON - 3420
DiscussionReport1.What do you expect to happen to stock price if some good news about futureearnings breaks out (for example, a drug company has found a new drugsuccessful in curing certain disease)? Trace the actions of the traders after thenews. Wh
The Chinese University of Hong Kong - ECON - 3420
ECON 3420A Financial Economics2010-2011 Term 1Discussion 4: Efficient Market Hypothesis (EMH) Evidence (I)1.Setting aside the technical elements of the volatility test, can you present in commonsense terms why a market that is too volatile in the pri
The Chinese University of Hong Kong - ECON - 3420
Financial Economics Discussion Question 6 918th October, 2010Q6:General Theory suggests stock prices are able to move far away from thefundamentals. Due to the advances in technology of communication, nowadays, thistheory is increasingly relevant. Th
The Chinese University of Hong Kong - ECON - 3420
ECON 3420A Financial Economics2010-2011 Term 1Discussion 6: Corporate Finance (I)1.Imagine a world of certainty. Suppose you own the copyright of a book. You arethinking of starting a company to publish your book. Because of complete certainty,the f
The Chinese University of Hong Kong - ECON - 3420
5.)Asweknow,manysmallfirmsalwaysborrowmoneyfrombankstocontinuetheirbusiness.Asbankswouldaskforcollateralingrantingloanandsmallfirmdoesnothaveenoughmarketableassets,manysmallbusinessownersfrequentlyusetheirownassetswhichmostofthemaretheirhousingtobethec
The Chinese University of Hong Kong - ECON - 3420
ECON 3420A Financial Economics2010-2011 Term 1Discussion 8: Mergers and Acquisitions (M&A)1.What features of an M&A would suggest that acquirer shareholders would likelygain after the acquisition.One feature of M&A that shareholders will likely gain
The Chinese University of Hong Kong - ECON - 3420
ECON 3420A (2011-12 Term 1)Discussion Report [Group 1]Name: Sin Leong HangSID: 11550025021.Risk: C > B > AA is a bond issued by the Hong Kong government. Bonds, in particular sovereignbonds, are considered to be low-risk investment vehicles, compar
The Chinese University of Hong Kong - ECON - 3420
ECON 3420 Financial EconomicsSample Mid-term Examination (2011-12 Term 1) (Closed-Book)Answer Guide1.(a) What is the major difference between risky arbitrage and riskless arbitrage?(b) Suppose the market cap of a company is $50 million. This company
The Chinese University of Hong Kong - ECON - 3420
ECON 3420 Financial EconomicsSample Mid-term Examination (2011-12 Term 1) (Closed-Book)Always explain your answer clearly and completely. Credits are given to concise andwell-presented answers. Provide diagrams wherever appropriate.Time allowed = 70 m
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 1Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1Lecture NotesGo tohttp:/www.math.cuhk.edu.hk/jwongUser Name: mat
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 2Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1L INEAR E QUATIONS AND M ATRICES1. Linear Systems2. Matrices3. D
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 1cDr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1L INEAR E QUATIONS AND M ATRICES1. Linear Sy
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 4Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1S OLVING THE L INEAR S YSTEMSGaussian Elimination and LU Factoriza
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 5Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1E LEMENTARY M ATRICESLEMENTARYM ATRICES2We have seen that any m
The Chinese University of Hong Kong - MATH - 2510
Markov ChainDr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsFall, 2010Produced by Jeff Chak-Fu WONG1A PPLICATIONS TO M ARKOV C HAINSPPLICATIONS TOM ARKOV C HAINS2What
The Chinese University of Hong Kong - MATH - 2510
Partitioned MatrixDr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1M ATRIX O PERATIONS : PAR TITIONINGATRIXO PERATIONS : PARTITI
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 6Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kong MATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1D ETERMINANTS1. Denition and Properties2. Cofactor Expansion and
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 7Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1R EAL V ECTOR S PACES1. Vector Spaces2. Subs
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 9Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1R EAL V ECTOR S PACES1. Vector Spaces2. Subs
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 10Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1R EAL V ECTOR S PACES1. Vector Spaces2. Sub
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 11Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1R EAL V ECTOR S PACES1. Vector Spaces2. Sub
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 12Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1 Matrix Transformations Linear Transformatio
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 13Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1R EAL V ECTOR S PACES1. Coordinates and Chan
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 15Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1D OT P RODUCT ON RnWe shall now dene the not
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 16Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsFall, 2010Produced by Jeff Chak-Fu WONG1O R THONORMAL B ASES IN RnRTHONORMALB ASES IN
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 17Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1O R THOGONAL C OMPLEMENTSRTHOGONALC OMPLEME
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 18Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1A PPLICATIONS OF R EAL V ECTOR S PACES - QR-F
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 19Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1E IGNEVALUES , E IGENVECTORS , AND D IAGONALI
The Chinese University of Hong Kong - MATH - 2510
Lecture Note 20Dr. Jeff Chak-Fu WONGDepartment of MathematicsChinese University of Hong Kongjwong@math.cuhk.edu.hkMATH 2510Linear Algebra and Its ApplicationsWinter, 2011Produced by Jeff Chak-Fu WONG1E IGNEVALUES , E IGENVECTORS , AND D IAGONALI
The Chinese University of Hong Kong - MATH - 2510
THE CHINESE UNIVERSITY OF HONG KONGDepartment of MathematicsMATH2510 Linear Algebra and Applications (Winter 2011)Homework 1Due Date: 28th January, 2011Name:Student No.:Class:Final Result:I acknowledge that I am aware of University policy and reg
The Chinese University of Hong Kong - MATH - 2510
THE CHINESE UNIVERSITY OF HONG KONGDepartment of MathematicsMATH2510 Linear Algebra and Applications (Winter 2011)Homework 2Due Date: 18th February, 2011Name:Student No.:Class:Final Result:I acknowledge that I am aware of University policy and re
The Chinese University of Hong Kong - MATH - 2510
THE CHINESE UNIVERSITY OF HONG KONGDepartment of MathematicsMATH2510 Linear Algebra and Applications (Winter 2011)Homework 3Due Date: 25th February, 2011Name:Student No.:Class:Final Result:I acknowledge that I am aware of University policy and re
The Chinese University of Hong Kong - MATH - 2510
THE CHINESE UNIVERSITY OF HONG KONGDepartment of MathematicsMATH2510 Linear Algebra and Applications (Winter 2011)Homework 4Due Date: 25th March, 2011Name:Student No.:Class:Final Result:I acknowledge that I am aware of University policy and regul
The Chinese University of Hong Kong - MATH - 2510
THE CHINESE UNIVERSITY OF HONG KONGDepartment of MathematicsMAT2310 Linear Algebra and Applications (Winter 2011)Homework 5Due Date: 13th April 2011Name:Student No.:Class:Final Result:I acknowledge that I am aware of University policy and regulat
The Chinese University of Hong Kong - MATH - 2510
THE CHINESE UNIVERSITY OF HONG KONGDepartment of MathematicsMAT2510 Linear Algebra and Applications (Winter 2011)Homework 6Name:Student No.:Class:Final Result:I acknowledge that I am aware of University policy and regulations on honesty in academi
The Chinese University of Hong Kong - MATH - 2510
The Chinese University of Hong Kong - MATH - 2510
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The Chinese University of Hong Kong - MATH - 2510
The Chinese University of Hong Kong - MATH - 2510
The Chinese University of Hong Kong - MATH - 2510
The Chinese University of Hong Kong - MATH - 2510
The Chinese University of Hong Kong - FINA - 4110
Faculty of Business AdministrationThe Chinese University of Hong KongOPTIONS AND FUTURES(Fin4110A/B, First Term, 2011-2012)Section:Time:Venue:Fin4110ATh 14:30-17:15pmLSK-LT7Instructor:Office Hour:T.A.:Fin4110BWe 14:30-17:15TYW-LTProf. H. Z
The Chinese University of Hong Kong - FINA - 4110
IntroductionChapter 11The Nature of DerivativesA derivative is an instrument whose valuedepends on the values of other morebasic underlying variables2Examples of Derivatives Futures Contracts Forward Contracts Swaps Options3Futures Contracts
The Chinese University of Hong Kong - FINA - 4110
Mechanics of FuturesMarketsChapter 21Futures ContractsAvailable on a wide range of underlyingsExchange tradedSpecifications need to be defined:What can be delivered,Where it can be delivered, &When it can be deliveredSettled daily2MarginsA m
The Chinese University of Hong Kong - FINA - 4110
Hedging Strategies UsingFuturesChapter 31Long & Short HedgesA long futures hedge is appropriate whenyou know you will purchase an asset inthe future and want to lock in the priceA short futures hedge is appropriatewhen you know you will sell an a
The Chinese University of Hong Kong - FINA - 4110
Interest RatesChapter 41Types of RatesTreasury ratesLIBOR ratesRepo rates2Measuring Interest RatesThe compounding frequency usedfor an interest rate is the unit ofmeasurementThe difference between quarterlyand annual compounding isanalogous
The Chinese University of Hong Kong - FINA - 4110
Determination of Forwardand Futures PricesChapter 51Consumption vs Investment AssetsInvestment assets are assets held bysignificant numbers of people purely forinvestment purposes (Examples: gold,silver)Consumption assets are assets heldprimaril
The Chinese University of Hong Kong - FINA - 4110
SwapsChapter 71Nature of SwapsA swap is an agreement toexchange cash flows at specifiedfuture times according to certainspecified rules2An Example of a Plain VanillaInterest Rate SwapAn agreement by Microsoft to receive6-month LIBOR & pay a fi
The Chinese University of Hong Kong - FINA - 4110
Securitization and theCredit Crisis of 2007Chapter 81Asset Backed Security (Simplified)Senior TranchePrincipal: $80 millionReturn = LIBOR + 60bpAsset 1Asset 2Asset 3SPVMezzanine TranchePrincipal:$15 millionReturn = LIBOR+ 250bpAsset nPrinc
The Chinese University of Hong Kong - FINA - 4110
Mechanics of OptionsMarketsChapter 91Types of OptionsA call is an option to buyA put is an option to sellA European option can be exercised onlyat the end of its lifeAn American option can be exercised atany time2Option PositionsLong callLon
The Chinese University of Hong Kong - FINA - 4110
Properties of StockOptionsChapter 101Notationc : European calloption pricep : European putoption priceS0 : Stock price todayK : Strike priceT : Life of option: Volatility of stockpriceC : American Call optionpriceP : American Put optionpr
The Chinese University of Hong Kong - FINA - 4110
Trading StrategiesInvolving OptionsChapter 111Three Alternative StrategiesTake a position in the option andthe underlyingTake a position in 2 or moreoptions of the same type (A spread)Combination: Take a position in amixture of calls & puts (Ac
The Chinese University of Hong Kong - FINA - 4110
Introduction to BinomialTreesChapter 121A Simple Binomial ModelA stock price is currently $20In three months it will be either $22 or $18Stock Price = $22Stock price = $20Stock Price = $182A Call Option (Figure 12.1, page 268)A 3-month call op
The Chinese University of Hong Kong - FINA - 4110
Valuing Stock Options:The Black-Scholes-MertonModelChapter 131The Black-Scholes-MertonRandom Walk AssumptionConsider a stock whose price is SIn a short period of time of length t thereturn on the stock (S/S) is assumed to benormal with mean t an
The Chinese University of Hong Kong - FINA - 4110
Options on Stock Indicesand CurrenciesChapter 151Index OptionsThe most popular underlying indices in theU.S. areThe S&P 100 Index (OEX and XEO)The S&P 500 Index (SPX)The Dow Jones Index times 0.01 (DJX)The Nasdaq 100 Index (NDX)Contracts are on
The Chinese University of Hong Kong - FINA - 4110
Futures OptionsChapter 161Mechanics of Call Futures OptionsWhen a call futures option is exercisedthe holder acquires1.2.A long position in the futuresA cash amount equal to the excess of thefutures price at previous settlement over thestrike p