FINS3635 Options Group Assignment
Group Members:
Yunlong Justin Zhang - z3249617
Peter Yue Wang - z3219718
Sang Hoon Kim - z3212203
Shanshan Cathy Liu - z3284821
Michael Lawrence - z3290926
Selected Stocks:
Large market cap: AAPL - Apple Inc. (NASDAQ)
Med
Part 1 - Hedging Strategies Using
Futures
Gustavo Louis G. Montano
There are clear distinctions between the characteristics of forwards and future contracts.
While their objectives are very similar, the contents of the contract in which they are
formally
Lecture 4 - Combinations of Options,
Binomial Pricing
Gustavo Louis G. Montano
1 More Combinations of Options
1.1 The Bullish Spread
A long position in a bullish spread is created by
Buying 1 call at a strike price X1 and cost c1
Selling 1 call at a str
Part 2 - Determination of Forward and
Futures Prices
Gustavo Louis G. Montano
1 Continuous Compounding
When dealing with derivative pricing and furthermore compounding, it is convenient it
use continuous compounding.
Definition (Continuous Compounding): W
Lecture 8 - The Black-Scholes-Merton
Model
Gustavo Louis G. Montano
1 Stock Price and the Lognormal Property
We are assuming that the change in stock price follows at Ito Process, described by
p
dS = Sdt + S dtz,
where z N (0, 1) and is the expected conti
Week 11 - Numerical Procedures
Gustavo Louis G. Montano
Questions:
3.1 - Technically this is the delta at the next time step.
According to the tree diagram, what is the next time step
Week 11 - Slide 10.
3.3 - In the calculation of theta, why do we on
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301F/G DERIVATIVES
SECOND SEMESTER, 2010-2011
Tutorial 3 Answer Chapter 4
Question 1
If the forward price were $0.80 instead of $1, we would get the following table:
With a forward price o
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301F/G DERIVATIVES
SECOND SEMESTER, 2010-2011
Tutorial 4 Answer Chapter 5 & 6
Question 1
(a)
We plug the continuously compounded interest rate, the forward price, the initial
index level a
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301F/G DERIVATIVES
SECOND SEMESTER, 2010-2011
Tutorial 5 Answer Chapter 7
Question 1
(a) We
have to take into account the interest we (or our counterparty) can earn on the
FRA settlement i
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301F/G DERIVATIVES
SECOND SEMESTER, 2010-2011
Tutorial 2 Answer Chapter 3
Question 1
(i) Payoff: If we buy the index, we receive at the time of expiration T of the options
simply ST. The p
FINS 5535 PRACTICE PROBLEMS
For the practice problems, you can use either the 5th, 6th, 7th or 8th Edition of Hull.
However, you have to be careful with the numbering. All the solutions will use the
numbering of the 8th Edition, so when checking your answ
FINS 5535 PRACTICE PROBLEMS
Ch. 13 Wiener Processes and Its Lemma
For the practice problems, you can use either the 4th, 5th, 6th, 7th or 8th Editions of Hull.
However, you have to be careful with the numbering. All the solutions will use the
numbering of
4/15/2014
The Perfect Payday - WSJ.com
Dow Jones Reprints: This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues,
clients or customers, use the Order Reprints tool at the bottom of
FINS5535 PRACTICE PROBLEMS
For the practice problems, you can use either the 5th, 6th, 7th or 8th Edition of Hull.
However, all the solutions will use the numbering of the 8th Edition, so when checking
your answers, you will have to be careful to check th
FINS 5535 PRACTICE PROBLEMS
Ch. 16 and Ch. 17 Options on Stock Indices, Currencies, and Futures
For the practice problems, you can use either the 4th, 5th, 6th, 7th or 8th Edition of Hull.
However, you have to be careful with the numbering. All the soluti
Week 12 - Exotic Options
Gustavo Louis G. Montano
Questions:
Are we required to know pricing formulas? Or simply how they work an whether
they may be more or less expensive than regular options?
Definition (Gamma): The gamma of a derivative is the rate o
Lecture 3 - Commodity Futures, Swap &
Intro to Options
Gustavo Louis G. Montano
1 Commodity Futures
There are two types of commodities
1. Investment commodities that are held for investment purposes.
2. Consumption commodities that are held for consumptio
Swaps
NOTE: for interest rate swaps, the principal need not be
(Ref: Ch. 7, Hull)
exchanged; here it is exchanged. (This implies a
greater default risk for currency swaps.)
Comparative Advantage Argument
7.8 Currency Swaps
Example: Suppose the current New
Options and other derivative securities are important
Options Markets: Introduction
because:
(Hull Ch. 9-11, 8th Ed.)
they are effective risk management tools;
you can think of any asset as a portfolio of options
THE OPTION CONTRACT
you can use options to
If the stated, or quoted rate (sometimes called the APR)
Determination of Forward and Futures Prices
is r compounded m times per year then we get the
(Hull Ch. 5)
EAR by compounding:
1 + y = (1 +
Continuous compounding
Its common to use continuously compo
The one who agrees to buy the asset at the future date
Hedging Strategies Using Futures
has a long position; the one who agrees to sell the
(Hull Ch. 3)
asset at the future date has a short position.
Example: Grain forwards. The grain farmer has the
FORWA
Introduction to Binomial Trees
to a 10% increase in the stocks price, and d =
(Hull Ch. 12)
Sd 45
=
S
50
= 0.90, which corresponds to a 10% decrease. In
Binomial Option Pricing
addition, there is a one-year European call on the stock
Two-State Option Pric
Introduction to Credit Risk and Lending
Thuy-Duong To
T1 - Introduction
1 / 39
Lecture outline
Lecture outline
Credit function and credit risk
Credit risk fundamentals
The Credit Process
Lending
Summary
First look at lending
T1 - Introduction
Definition,
FINS5535
Lecture 1 (and a big part of lecture 2)
Introduction and hedging with
futures
Teachers
The first six lectures (week 1-6) are given by Dr. Haifeng Wu
Office hours Tuesday 15:00 to 17:00 in ASB 311
Lectures in week 7-12 are given by Dr. Thomas
FINS5535
Lecture 2 Pricing of Forward & Futures
You are expected to know after this lecture
Interest rate compounding methods and its applications
Features of investment asset and consumption assets
Short selling
Forward price vs. forwards value
Arbi
UNSW Business School
School of Banking and Finance
FINS 5535
DERIVATIVE SECURITIES AND RISK MANAGEMENT TECHNIQUES
Lecture 5 Binomial Trees Options Pricing Model & Stochastic
Processes
You Are Expected to Know After This Lecture
Single step binomial trees
FINS5535
Lecture 2 Pricing of Forward & Futures
You are expected to know after this lecture
Interest rate compounding methods and its applications
Features of investment asset and consumption assets
Short selling
Forward price vs. forwards value
Arbi
FINS 5535
Derivatives and Risk Management Techniques
Instructors: Dr. Thomas Ruf, Johnno Wu
SEMESTER 1, 2017
Practice Problem Set #1
F UTURES
1. A company enters into a long futures contract to buy 50,000 units of a
commodity for 90 cents per unit. The in
Week 10 - The Greek Letters
Gustavo Louis G. Montano
Questions:
7: This suggests that, generally, theta and gamma of a derivative portfolio have
opposite signs.
Week 10, Slide 25.
11.1 - The procedure for matching the put index option delta.
Week 10,
Lecture 5 - Binomial Pricing
Gustavo Louis G. Montano
This lecture will introduce the discrete pricing of options through binomial methods.
There are two methods generally:
Risk-neutral probabilities
Delta-hedged portfolio
1 Two-State Option Pricing via
Lecture 10 - Options on Indices,
Currencies and Futures
Gustavo Louis G. Montano
Questions:
1.3 - The condition for exercising a dividend: Di > X
Xe
r(ti+1 ti )
.
5 - With the inclusion of a dividend yield q, why does the the stock grow at e(r
q)T
.
7