Derivatives
Lecture 2
Option Overview
Buyer / Long
Seller / Short
Call option Right tobuy asset
Obligation to sell asset
Put option
Obligation to buy asset
Right tosell asset
Options
Option - Gives th
Derivatives
Lecture 1
Introduction
Welcome
Syllabus
Homework policy
Email
Taking notes
Derivatives Definition
Derivatives are financial instruments whose
price and value derive from the value of t
Derivatives
Lecture 9
Term Structure & Spots
Rates
8.04
6.00
4.84
2
3
10
Pure Term Structure
Maturity (years)
YTM
1
3.0%
5
3.5%
10
3.8%
15
4.1%
20
4.3%
30
4.5%
The Pure Term Structure or Pure Yield Cu
Derivatives
Lecture 6
Index Futures Strategies
Index Mutual Fund Management
Index mutual funds attempt to track the market index
It is difficult to track the Market index because the market
index
pay
Derivatives
Lecture 8
Bond Price Sensitivity
Longer term bonds prices are more sensitive to
interest rate changes
If a bond is more sensitive to interest rate changes,
it is riskier
Maturity and Durat
Derivatives
Lecture 7
Bond Prices
Example
If today is October 2001, what is the value of the following bond?
An IBM Bond pays $115 every Sept for 5 years. In Sept 2006 it pays an
additional $1000 and
Derivatives
Lecture 5
Hedge Ratios
The art in hedging is finding the exact number
of contracts to make the net gain/loss = $ 0.
This is called the Hedge Ratio
Value Asset
# of Ks = - X Hedge Ratio
Val
Derivatives
Lecture 3
Charting Options
Profit
Asset
Price
Loss
Charting Options Long
Call
Profit
Asset
Price
Loss
Charting Options Short
Call
Profit
Asset
Price
Loss
Charting Options Long
Put
Profit
A
Derivatives
Lecture 10
Short Sale Example
Purchase of shares
April: Purchase 500 shares for $120
-$60,000
May: Receive dividend
+500
July: Sell 500 shares for $100 per share
+50,000
Net profit = -$9,5