Introduction
Chapter 1
Fundamentals of Futures and Options Markets, 7th Ed, Ch 1, Copyright John C. Hull 2010
1
The Nature of Derivatives
A derivative is an instrument whose value
depends on the values of other more
basic underlying variables
Fundamentals
Volatility Smiles
Chapter 19
Fundamentals of Futures and Options Markets, 7th Ed, Ch 19, Copyright John C. Hull 2010
1
Volatility Smile
A
volatility smile shows the variation of
the implied volatility with the strike price
The volatility smile is the sam
Valuing Stock Options:
The Black-Scholes-Merton
Model
Chapter 13
Fundamentals of Futures and Options Markets, 7th Ed, Ch 13, Copyright John C. Hull 2010
1
The Black-Scholes-Merton
Random Walk Assumption
Consider
a stock whose price is S
In a short perio
Trading Strategies
Involving Options
Chapter 11
Fundamentals of Futures and Options Markets, 7th Ed, Ch 11, Copyright John C. Hull 2010
1
Three Alternative Strategies
Take
a position in the option and
the underlying
Take a position in 2 or more
options
Mechanics of Options
Markets
Chapter 9
Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright John C. Hull 2010
1
Types of Options
A
call is an option to buy
A put is an option to sell
A European option can be exercised only
at the end of
Interest Rate Futures
Chapter 6
Fundamentals of Futures and Options Markets, 7th Ed, Ch 6, Copyright John C. Hull 2010
1
Day Count Conventions
in the U.S. (Page 131-132)
Treasury Bonds: Actual/Actual (in period)
Corporate Bonds: 30/360
Money Market Instru
Determination of Forward
and Futures Prices
Chapter 5
Fundamentals of Futures and Options Markets, 7th Ed, Ch 5, Copyright John C. Hull 2010
1
Consumption vs Investment Assets
Investment
assets are assets held by
significant numbers of people purely for
Interest Rates
Chapter 4
Fundamentals of Futures and Options Markets, 7th Ed, Ch 4, Copyright John C. Hull 2010
1
Types of Rates
Treasury
rates
LIBOR rates
Repo rates
Fundamentals of Futures and Options Markets, 7th Ed, Ch 4, Copyright John C. Hull 201
Hedging Strategies Using
Futures
Chapter 3
Fundamentals of Futures and Options Markets, 7th Ed, Ch3, Copyright John C. Hull 2010
1
Long & Short Hedges
A
long futures hedge is appropriate
when you know you will purchase an
asset in the future and want to l
Mechanics of Futures
Markets
Chapter 2
Fundamentals of Futures and Options Markets, 7th Ed, Ch 2, Copyright John C. Hull 2010
1
Futures Contracts
Available
on a wide range of underlyings
Exchange traded
Specifications need to be defined:
What can be de
1:20 PM (CST)
Unit 4 - Individual Project
Assignment Overview
Go To:
Type: Individual Project
Unit: The CAPM Pricing Model
Due Date: Sun, 1/31/16
Grading Type: Numeric
Points Possible: 115
Points Earned: 0
Deliverable Length: 600 to 800 words
Assignment D