Chapter 8: Option Pricing
European Options in the Binomial Tree Model
American Options in the Binomial Tree Model
Black-Scholes Formula
1
European Options in the Binomial Tree Model
European derivative security or contingent claim defined on the
underl

Chapter 6: Forward and Futures Contracts
Part I: Forward
Part II: Futures
1
1
Forward
1.1
Forward Contracts: Definition and Properties
Forward contract: Is an agreement to trade an asset (the
underlying asset),
at fixed time, T , called the delivery t

Math 357 Winter 2016: Homework no.1
Due Wednesday January 29th, 2016.
Problem 1
Assume that the risk-free interest rate is 9% per annum with continuous
compounding and that the stock index pays dividends monthly (at the end
of the month) as follows.
In Fe

Chapter 7: Options = General Properties
PART I
Introduction to options
Put-Call Parity
Bounds on Option Prices
1
Introduction to options
1. Definitions:
A Call is a contract between the writer (or seller) of the call
and the buyer of the call. The buy

Chapter 7: Options PART II
Variables Determining options
European Options
American Options
Time Value of Options
1
Variables Determining options
European Options
Theorem 0.1 The European call (resp. put) option price
decreases (respect. increases) wi

Math 357 Winter 2015: Exercises For Practice
Week of January 1922, 2015
Problem 1
Consider forward contract, issued on January 1st, 2016, that will mature on
October 31st, 2015. The forward is written on a stock with a price of $50
on January 1st, 2016. W