Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 7
Lesson 13: Asian, Barrier, and Compound options.
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
incorrect answers which have some positive wo
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 9
Lesson 15: Monte Carlo Valuation.
Due: December 8, 2015 (Tue)
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
incorrect answers which have some positive w
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 8
Lesson 14: Gap, Exchange, and Other Options.
Due: December 1, 2015 (Tue)
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
incorrect answers which have some
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 6
Lesson 11: The BlackScholes formula: applications and volatility.
Lesson 12: Delta hedging.
Problem 1
For a 1year European call option on a stock, you are given:
(i) The stocks price is 5
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 7
Lesson 13: Asian, Barrier, and Compound options.
Due: November 10, 2015 (Tue)
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
incorrect answers which have
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 6
Lesson 11: The BlackScholes formula: applications and volatility.
Lesson 12: Delta hedging.
Due: November 3, 2015 (Tue)
Sucient work must be shown to get credit for a correct answer. Partial credit ma
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 5
Lesson 8: Fitting stock prices to a lognormal distribution.
Lesson 9: The BlackScholes formula.
Lesson 10: The BlackScholes formula: Greeks.
Problem 1
You are given the following informat
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 5
Lesson 8: Fitting stock prices to a lognormal distribution.
Lesson 9: The BlackScholes formula.
Lesson 10: The BlackScholes formula: Greeks.
Due: October 20, 2015 (Tue)
Sucient work must be shown to
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 4
Lesson 6: Early Exercise of Options and Alternative Trees.
Lesson 7: Modeling stock prices with the lognormal distribution.
Problem 1
For a 1year American put option on a stock with 6 mont
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 4
Lesson 6: Early Exercise of Options and Alternative Trees.
Lesson 7: Modeling stock prices with the lognormal distribution.
Due: October 8, 2015 (Thurs)
Sucient work must be shown to get credit for a c
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 2
Lesson 2: Comparing Options
Lesson 3: Binomial Trees  Stock, One Period
Problem 1
You are given:
(i) The price of a stock is 33.
(ii) The stock pays continuous dividends at the annual rate
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 3
Lesson 4: Binomial Trees  General
Lesson 5: Other valuation methods of pricing options.
Problem 1
For a 1year European put option on a stock modeled with a binomial tree:
(i) The tree has
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
SOLUTION TO HOMEWORK 1
Lesson 0: Review of derivative instruments
Lesson 1: PutCall Parity
Problem 1
For
i)
ii)
iii)
a nondividend paying stock, you are given:
Its current price is 32.
A European call option on
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 3
Lesson 4: Binomial Trees  General
Lesson 5: Other valuation methods of pricing options.
Due: September 17, 2015 (Thurs)
Sucient work must be shown to get credit for a correct answer. Partial credit ma
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 2
Lesson 2: Comparing Options.
Lesson 3: Binomial Trees  Stock, One Period.
Due: September 10, 2015 (Thurs)
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
Principles of Actuarial Models: Financial Economics
ACTS 4302

Fall 2014
ACTS 4302
Instructor: Natalia A. Humphreys
HOMEWORK 1
Lesson 0: Review of derivative instruments
Lesson 1: PutCall Parity
Due: September 3, 2015 (Thurs)
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
incorr
ACTS 6308
Instructor: Yuly Koshevnik
SOLUTION TO HOMEWORK 2
Section 3. Force of interest, ination.
Section 4. Annuityimmediate and annuitydue.
Problem 1
You are given that A(t) = Kt2 + Lt + M , for 0 t 2, and that A(0) = 100, A(1) = 109, and
1
A(2) = 12
ACTS 6308
Instructor: Yuly Koshevnik
SOLUTION TO HOMEWORK 1
Section 1. Calculus review and eective rates of interest and discount.
Section 2. Nominal rates of interest and discount.
Problem 1
On September 27, Eric deposits 100 into a savings account which
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 7
Section 13: Measures of the rate of return on a fund.
Section 14: The term structure of interest rates, forward rates of interest and duration.
Due: November 2, 2015
Sucient work must be shown to get credit
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 8
Section 15: Introduction to nancial derivatives, forward and futures contracts.
Section 16: Introduction to options.
Due: December 7, 2015
Sucient work must be shown to get credit for a correct answer. Parti
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 5
Section 9: Amortization of a loan.
Section 10: The sinking fund method of loan repayment.
Due: October 21, 2015
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 6
Section 11: Bond valuation.
Section 12: Bond amortization, callable bonds.
Due: October 28, 2015
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
incorrect answe
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 4
Section 7: Annuities whose payments follow a geometric progression.
Section 8: Annuities whose payments follow an arithmetic progression.
Due: October 5, 2015
Sucient work must be shown to get credit for a c
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 3
Section 5: Annuity valuation at any time point.
Section 6: Annuities with diering interest and payment period.
Due: September 23, 2015
Sucient work must be shown to get credit for a correct answer. Partial c
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 1
Section 1. Calculus review and eective rates of interest and discount.
Section 2. Nominal rates of interest and discount.
Due: September 2, 2015 (Monday)
Su cient work must be shown to get credit for a corre
ACTS 6308
Instructor: Yuly Koshevnik
HOMEWORK 2
Section 3. Force of interest, ination.
Section 4. Annuityimmediate and annuitydue.
Due: September 16, 2015
Sucient work must be shown to get credit for a correct answer. Partial credit may be given for
inc