Review1 - FI 478 Investment Strategies and Speculative...

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FI 478 Investment Strategies and Speculative Markets Professor Fan Yu Course Review I This Version: January 28, 2008 c 2008 Fan Yu. All Rights Reserved. 1
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Key Concepts from Lecture Note #1 Zero-cost portfolio with no risk of loss and some chance of a gain. The law of one price. ± Same asset can have prices in two locations. ± Same asset can have prices in two points in time. The concept of ±replication.² An example of how replication pins down the price of a derivative instrument. Using stock and cash to replicate an option. 2
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Di/erences between forward and futures. Marking to market. settlement price. Amount lower than maintenance margin triggers margin call. In a margin call, margin account is replenished up to the initial margin. Amount over the initial margin can be withdrawn.
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This note was uploaded on 03/19/2008 for the course FI 478 taught by Professor Yu during the Spring '08 term at Michigan State University.

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Review1 - FI 478 Investment Strategies and Speculative...

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