Chapter1
Quiz:
1.1 what is the difference between a long futures position and a short futures position?
Long position: a position involving the purchase of an asset.
Short position: a position involving the sale of an asset.
1.2 Explain carefully the diff
Notes 13
Interest Rate Swaps
Learning Objectives
1. Understand the basics of plain Vanilla interest rate swaps. You should be able
to set up the swap.
2. Understand the ability of swaps to transform the liabilities of a firm
3. Be able to introduce a swap
Finance 3506
Notes 15
Credit Risk and Credit Derivatives
Learning objectives
1. Understand ratings and the system of rating for bonds
2. Understand and be able to use historical information on defaults and
recoveries
3. Probabilities of default and bond r
Notes 10
Finance 3506
Learning Objectives
1. Understand the returns and distribution of stock returns and how they tie into
the development of the Black-Scholes-Merton options pricing model.
2. Understand the basic assumptions and the derivation of the Bl
Notes 13
Finance 3506
Learning Objectives
1. Modification of the Black-Scholes Formula to accommodate continuously paid
dividends
2. Understand how to use the binomial with continuous dividend payments.
3. Valuation of index options using the modified Bla
Sample Questions Options and Futures Exam 2
1. . Describe the difference between an option's contract and a future's contract. What is
the difference when speculating using option and speculation using the future's market.
2. Describe the four basic optio
Sample Questions Options and Futures Exam 2
1. . Describe the difference between an option's contract and a future's contract. What is
the difference when speculating using option and speculation using the future's market.
Options contracts give the right
Questions related to the Value at Risk, and index options
1. You have been asked by your boss to determine the maximum amount that
can be lost over the next 15 days in your portfolio that you manage. Your boss
has specified that the appropriate degree of
Questions related to the Value at Risk, and index options
1. You have been asked by your boss to determine the maximum amount that
can be lost over the next 15 days in your portfolio that you manage. Your boss
has specified that the appropriate degree of
Sample test question for Finance 3506
1. Contrast a futures contract with a forward contract.
Forwards private contract and trade OTC while futures trade on exchanges
Forwards are unique futures are standardized
Forwards have no protection against default
Sample test question for Finance 3506
1. Contrast a futures contract with a forward contract.
2. Why is the profit or loss on a futures contract is dependent on the path that the prices take?
3. What are the advantage of a electronic market for futures?
4
1 You have entered into a long position in the futures market. You have purchase 1 DJIA
futures contract (trades $10 times the index). The price you entered the position is
10,700. You currently have $4500 in your futures account. The initial margin is $4
Notes 11
Finance 3506
Learning Objective
1. Understand the application of Delta and gamma in option position management
2. Be able to explain delta hedging and its applications
3. Calculate the delta of a portfolio of options
4. Understand the means of ca
Value at Risk
Lecture Notes 14
Recently there has developed a need to establish a single number that gives
senior management a summarization of the overall risk faced by the firm. The
term Value at Risk (VaR) was coined by Till Guldimann while he was work
Notes 4
Finance 3506 Derivatives
Learning Objectives
1. Understand what the different types of interest rates and compounding types
2. Understand the process for measuring rates and how rates are determined for zero
coupon bonds, bond prices, zero treasur
Finance 3506 B (3:30 PM- 4:50 PM)
Fall 2015
Derivatives and Financial Risk Management
Instructor: Dr. Bruce B. Rader
Office Hours: Tu/Th. 10:30 AM-12:00 PM, or by appointment
Main Campus: Alter Hall 430
Central: (215) 204-5231
Email: [email protected]
Cou
1.
03/03/05 Sell 50 March 05 10 year T-Note Futures Executed at 109:24
03/07/05 Buy 50 March o5 10 year T-Note Futures Executed at 110:05
Loss $20,262.50
Explanation:
The expectations for tomorrows unemployment statistics are an increase of nonfarm payrol
Finance 3506
Fall 2015
Class Project
The project for this semester, which shall count for 15% of the grade in the class
will consist of the use of Stock-Trak simulation account to speculate using the
Options and futures market. Each student shall be requi
Learning Objectives
Notes 1
Options and Futures
1. Understand what a futures contract is, it uses and its history
2. Understand the concept of an Options contract
3. Know the different general categories of traders and their motivation
A. Futures Contract
Note 3
Finance 3506 Derivatives
Learning Objectives
1. Learning the basics for hedging using futures contracts
2. Be able to distinguish between a long and short hedge
3. Understand why some firms hedge and others dont
4. Understand the relationship betwe
Notes 6
Finance 3506
Learning Objectives
1. Understand the structure of Put and Call options
2. Have understanding of the different types of options that are traded
3. Understand the structure of stock options and their trading particulars
4. Student able
Notes 8
Finance 3506
Learning Objectives
1. Understand the different options strategies and their profiles
Option Strategies
What are the uses of options? Options are traded for two purposes for speculation and
hedging. A speculator takes on risk in order
Notes 7
Finance 3506
Learning Objectives
1. Understand the bounds for a stock option
2. Learn and be able to apply Put/call parity
3. The effects of dividends on the bounds of options and Put/call parity
4. Understand what the price of an option depends u
Notes 9
Finance 3506
Learning Objectives
1. Understand an be able to calculate the value of an option using the one period
binomial model
2. Extend that logic to a two period binomial model
3. Understand the difference between real world and a risk neutra
Notes 5
Derivatives
Learning Objectives
1. Understand the difference between investment assets and consumption assets
2. Be able to calculate the forward price for investment assets
3. Understand the effects of interim income or a known yield
4. Be able t