Homework (Due on 13 May 2013 before the class)
1. The price of an American call on a non-dividend-paying stock is $4. The stock price
is $51, the strike price is $50, and the expiration date is in thr
Chapter 7 Optimal Risky Portfolios
The following data apply to Problems 4 through 10: A pension fund manager is
considering three mutual funds. The first is a stock fund, the second is a long-term
gov
Chapter 8 Index Models
6. The following are estimates for two stocks:
Stock
Expected Return Beta
Firm-Specific Standard Deviation
TM
13%
0.8
30%
BMW
18%
1.2
40%
The market index has a standard deviati
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Forward-Rate Agreements and Eurodollar Futures: Problems
1. Suppose it is currently May. What is the relation between the observed eurodollar fut
Implementing Binomial Models
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
Implementing Binomial Models
1
c
Rangarajan
K. Sundaram
Outline
Intr
Currency Swaps
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
Currency Swaps
1
c
Rangarajan
K. Sundaram
Outline
Introduction
Currency Swaps: Bac
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Pricing Forwards & Futures: Problems
Note Assume the only costs of carry are those mentioned in the question. In particular, there is no
convenie
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Exotic Options: Problems
1. Find the price of a binary cash-or-nothing put option in a binomial tree with the following parameters: S = 100, u =
Interest-Rate Swaps
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
Interest-Rate Swaps
1
c
Rangarajan
K. Sundaram
Outline
Introduction
Floating-
Exotic Options
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Stern School of Business
New York University
Undergraduate Program: Spring 2015
Exotic Options
1
c
Rangarajan
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Outline
Path-Independent Options
Digital
Sensitivity Analysis:
The Option Greeks
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
The Option Greeks
1
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Rangarajan
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Outline
Intr
Credit Derivative Products
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Stern School of Business
New York University
Undergraduate Program: Spring 2015
Credit Derivative Products
1
c
Rangarajan
K. Sundaram
Outline
Introduc
Binomial Models of Option Pricing
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
Binomial Option Pricing
1
c
Rangarajan
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Outline
Intr
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Futures and Options
Spring 2015
The Option Greeks: Problems
1. In the Black-Scholes model, what is higher, the delta of a one-year call or that of a two-year call
on the same st
Topic 6
Swaps
Text Book Ch 7.1,7.3 7.4 7.5-7.7, 7.9-7.10
1
Where are we now?
Derivatives
Forward (F)
and Futures (f)
Swaps
Options
A sequence of forwards
2
Introduction to Swaps
Two parties exchange
Topic 8 Introduction to Binomial
Option Pricing
1
Assumptions
1. No transaction cost
2. Stock can be short easily without costs
3. All trading profits are subject to the same tax rate
(or no tax rate)
Topic 11 Applications of BS Formula
1
Outline
European options with cash flows to the
underlying
Options on stock indices
Options on foreign currencies
Options on futures
American options
2
Basic
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Futures and Options
Spring 2015
The Black-Scholes Model: Problems and Solutions
1. Compute the three-month (T = 1/4) forward price F of a stock currently trading at $40 when
the
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Binomial Option Pricing: Problems
1. You are given the following tree of stock prices. In addition, the rate of interest per period is
constant a
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Option Payoffs & Trading Strategies: Problems
1. If you hold a callable bond and the volatility of interest rates increase, what do you think wou
Options: Payoffs and Trading Strategies
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Stern School of Business
New York University
Undergraduate Program: Spring 2015
Options: Payoffs & Trading Strategies
1
c
Rangarajan
K. S
FRAs and Eurodollar Futures
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
FRAs & Eurodollar Futures
1
c
Rangarajan
K. Sundaram
Outline
Introduc
The Black-Scholes Model
Rangarajan K. Sundaram
Stern School of Business
New York University
Undergraduate Program: Spring 2015
The Black-Scholes Model
1
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Outline
Introduction
T
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Credit Derivative Products: Problems and Solutions
1. A credit default swap provides protection against the default of the reference issuer in th
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Introduction & Futures Markets: Problems
1. Who bears default risk in a forward contract?
2. What is the difference between value and payoff in t
Rangarajan K. Sundaram
Futures and Options
Spring 2015
Interest-Rate Swaps: Problems
1. You hold a Libor FRN with a coupon rate that is capped at 10%. Explain whether the price is
increasing or decrea