European Put Option
Suu
Puu
Su
Pu
S0
P0
125.000
1.837
100.000
4.697
Sud=Sdu
Pud=Pdu
Sd
Pd
80.000
11.827
Sdd
Pdd
t=0
S0
u
d
p
K
risk-free rate
t=1
100
1.25
0.8
0.5
100
0.1
t=2
Suuu
Puuu
156.250
0.000
Suud=Sudu=Sduu
Puud=Pudu=Pduu
100.000
6.061
Sddu=Sudd=Sd
FBE 559 Fall 2016 Practice Exam
1. What are the differences between Options, Futures and Forwards ?
2. Graph buying a call option.
3. Graph writing a put option.
4. Graph going long in the futures or forward market.
5. Graph going short.
6. Graph owning a
Last Name:
First Name:
FBE 559 Midterm
Professor Scott Joslin
Spring 2012
Instructions:
The exam lasts 80 minutes. It consists of seven questions. Please answer all of them.
There is also a bonus question.
Credit for each question is noted below. The ma
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2013
Problem Set 2: Interest rate risk and hedging risk with futures and forwards
(Due: Thursday February 21st, in class)
Unless specied as an Excel Problem, all of t
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2013
Problem Set 4: BSM model
(Due: Thursday April 25th, in class)
Unless specied as an Excel Problem, all of these problems can (and should) be solved
with a pencil,
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2013
Outline of the Lecture
Determining Futures and Forwards Prices
Readings:
Hull Chapter 3 and 5 [6th, 7th, 8th edition]
Chapter 3 and 4 in 5th Edition
Example (Review)
Consider a
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2013
Problem Set 3: Binomial Option Pricing
(Due: Thursday April 4th, in class)
Unless specied as an Excel Problem, all of these problems can be solved with a pencil,
Last Name:
First Name:
FBE 559 Final Exam
Professor Scott Joslin
Spring 2012
Instructions:
The exam lasts 120 minutes. It consists of seven questions. Please answer all of them.
Credit for each question is noted below. The maximum score is 150 points.
Q
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2016
Examples for Options with dividends/futures
Problem 1: Options on a dividend paying stock
Suppose that the stock index is currently at S0 = $1000. The stock foll
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Black Scholes Model
c USC
Outline of the Lecture
Outline:
Review of Stock Process/Terminology
Black Scholes Equation
Readings
Hull Chapter 15
c USC
1/1
Assumptions of the Black-
Last Name:
First Name:
FBE 559 Final Exam
Professor Scott Joslin
Spring 2015
Instructions:
The exam lasts 120 minutes. It consists of seven questions. Please answer all of them.
Credit for each question is noted below.
Question
Points Possible Points Re
FBE 559
Management of Financial Risk
Case I
Team Member:
Enda Zhang
Ersi Ren
Junduo Lu
Weijie Yao
Problem 1
(1)
If sell all the shares on Feb. 4th at $103/share
I will get :
100*103=$10,300
If sell 73 shares to KKR for $109/share the residual shares will
USC Marshall School of Business
Financial Risk Management
Scott Joslin
FBE 559
Spring 2016
Quiz #2
The quiz is closed book, closed note, and closed neighbor. You may not use a calculator. You may
not use a smartphone or computer. Before you begin the quiz
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2016
Examples for Options with dividends
Problem 1: Put-call parity with dividends/American options
Show that
C P S0 P V [D] K
where C is the price of an American cal
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Outline of the Lecture
Outline:
Main issue: how to handle time value of money
Fixed-Income Markets
Term Structure of Interest Rates
Readings:
Hull Chapter 4
c USC
1/43
Definitio
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2016
Examples for Brownian Motion
Example 1: Simulating Stock Prices
Our model for stock prices is given by:
d(log(St ) = mdt + dBt
where log is the natural log (not
USC Marshall School of Business
Management of Financial Risk
Scott Joslin
FBE 559
Spring 2016
Examples for Binomial Option Pricing
Example 1: Binomial Pricing Example
Suppose that the stock price follows the process:
140
S0 = 100
80
and the risk free rate
USC Marshall School of Business
Financial Risk Management
Scott Joslin
FBE 559
Spring 2016
Case Assignment
Speculating on an Acquisition with Options: RJR Nabisco
(Due: Friday April 29th)
You may complete this assignment in groups of 14 people; it does no
Last Name:
First Name:
FBE 559 Final Exam
Professor Scott Joslin
Spring 2015
Instructions:
The exam lasts 120 minutes. It consists of seven questions. Please answer all of them.
Credit for each question is noted below.
Question
Points Possible Points Re
USC Marshall School of Business
Financial Risk Management
Scott Joslin
FBE 559
Spring 2016
Quiz #4
The quiz is closed book, closed note except for one page (front and back), and closed neighbor. You
may use a calculator. Before you begin the quiz, you mus
FBE 559 Exam One FALL 2014
OCT. 7, 2015 Form B
25 Multiple Choice (4 points each)
1.
Name _
A combination of shorting a stock and buying a call is similar to :
a.
buying a put option
b.
buying a straddle
c.
buying a call option
d.
writing a call option
e.
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Outline of the Lecture
Outline:
Main issue: how to handle time value of money
Fixed-Income Markets
Term Structure of Interest Rates
Readings:
Hull Chapter 4
c USC
1/43
Denition
S: D
D
N
N
A
U
F I ES
E G
G E
D T
E
H TRA
S
1
3
6
U
S
S
T
R
A
T
E
G
IE
S
A
N
D
9
IN
LS
O
TO
T
E
R
N
A
T
IO
N
A
L
M
A
R
K
E
T
S
CHAPTER ONE
Ignorance is the Real Evil? Buddha
I have never met a man so ignorant that I couldnt learn
something from him. Galil
Financial Risk Management
Scott Joslin
USC Marshall
FBE 559
Spring 2016
Outline of the Lecture
Outline:
Review of Discrete Probability
Readings
This is a review not covered in Hull.
c
USC
1/32
The Stock Process
We now want to start thinking about how to w
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Outline of the Lecture
Outline:
Introduction to Options
Properties of Option Prices
Use of Options
Readings
Hull 9, 10, and 11
c
USC
1/50
Option Types
Call:
Gives owner the righ
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Outline of the Lecture
Outline:
Binomial Option Pricing Model
Readings:
Hull Chapter 12
c
USC
1/65
Our goal is to see how we can replicate the risks in options by
holding a posi
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Outline of the Lecture
Determining Futures and Forwards Prices
Readings:
Hull Chapter 3 and 5
c
USC
1/43
Class note
The first quiz will be in class on Monday February 1st.
Bring
Financial Risk Management
Prof. Scott Joslin
USC Marshall
FBE 559
Spring 2016
Options with dividends, options on futures
c
USC
Outline of todays lecture
Outline:
Options when there are dividends
Options on Futures
Readings
Hull Chapter 17 and 18.
c
USC
1/