Midterm Exam on Options Markets
(FIN9891, EMSF Trimester 2, 2012)
Liuren Wu
Please remove everything from your desk, except one page (two sides) of notes, a calculator
(without phone or internet conne
1. Forward and Futures
Liuren Wu
We consider only one underlying risky security (it can be a stock or exchange rate), and we use S to
denote its price, with S0 being its current price (known) and ST b
4. Binomial tree
Liuren Wu
(A) 110
(D) 105
PP
P
P
(F) St = 100 PPP
(B) 100
P
(E) 95 PPP
P
(C) 90
Consider the above two-step binomial tree, with each step being three months, t = 0.25. The stock pric
2. Option denitions, payoffs, and boundaries
Liuren Wu
We consider one underlying risky security (it can be a stock or exchange rate), and we use S to denote
its price, with S0 = 100 being its current
Binomial Trees
Liuren Wu
Zicklin School of Business, Baruch College
Options Markets
Liuren Wu (Baruch )
Binomial Trees
Options Markets
1 / 22
A simple binomial model
Observation: The current stock pri
Midterm Exam on Options Markets
(FIN9891, EMSF Trimester 2, 2012)
Liuren Wu
1. You plan to make a market on a forward contract on a non-dividend paying stock. The stock
can be bought and sold easily w
Options Trading Strategies
Liuren Wu
Zicklin School of Business, Baruch College
Options Markets
Liuren Wu (Baruch)
Options Trading Strategies
Options Markets
1 / 19
Objectives
A strategy is a set of o
3. Option strategies
Liuren Wu
We consider one underlying risky security (it can be a stock or exchange rate), and we use S to denote
its price, with S0 = 100 being its current price and ST being its