FIN601
Derivatives
Eric Terry
8. Risk Management using Options
Practice Exercises
MCQ
1. European calls and puts, both having an $8 exercise price and four months to maturity, are
trading on the shares of Ritas Fajitas. Which options will have a higher de
Ryerson University
Ted Rogers School of Business Management
FIN601: Derivatives
Fall 2014
PREREQUISITE &/OR EXCLUSIONS: FIN 501: Investment Analysis
INSTRUCTOR INFORMATION
Eric Terry
Office Phone Number: (416) 979-5000 x. 2452
E-mail address: eterry@ryers
FIN601
Derivatives
Eric Terry
6. Option Pricing I
Practice Exercises
MCQ
1. Which of the following American puts on Mikes Bikes shares would be LEAST valuable?
a.
b.
c.
d.
November puts with a $50 strike price.
November puts with a $60 strike price.
Decem
FIN 601:
Derivatives
Lecture 6.
Option Pricing I
By Eric Terry
Overview
Valuation basics
Terminology & notation
Option strategies
The binomial model
American options
Handling dividends and interest
Calibration
Review questions
2
Terminology & Notation
FIN 601:
Derivatives
Lecture 9.
Interest Rate and Futures
Options
By Eric Terry
Overview
Futures options
Pricing futures options
Futures options vs. spot options
Interest rate options
Bond options
Caps, floors, and collars
Specialized interest rate opti
FIN 601:
Derivatives
Lecture 8.
Risk Management Using
Options
By Eric Terry
Overview
The Greeks
Computing delta and gamma
Computing vega
Computing Greeks for portfolios
Hedging with options
Static hedging
Dynamic hedging
Value-at-risk
Review questions
FIN 601:
Derivatives
Lecture 7.
Option Pricing II
By Eric Terry
Overview
The Black-Scholes model
Handling dividends and interest
Calibration
Review questions
2
Black-Scholes Model (1)
Consider option prices given by the binomial model as
the time perio
FIN601
Derivatives
Eric Terry
9. Interest Rate and Futures Options
Practice Exercises
MCQ
1. An American futures call on the Jazzed Decks Index will be worth more than an equivalent
American spot call on this index when the
is greater than the
.
a.
b.
c.
FIN601
Derivatives
Eric Terry
Midterm Test 1
Key Concepts
Introduction
Distinguish between futures, forwards, swaps, and options
Know the main uses of derivatives
Distinguish between speculators, hedgers, and arbitrageurs
Convert between EARs and cont
Selected Formulas
Cost-of-carry formula for an asset with a single payout:
F0 S0 erc T D e c
r T Td
S0 D e rc Td erc T
Cost-of-carry formula for commodities:
F0 S0 U e c
r - yc T
Value of a forward under marking to market:
V0 F0 K e rc T
Value of a for
FIN601
Derivatives
Eric Terry
7. Option Pricing II
Practice Exercises
MCQ
1. The delta of a put indicates:
a.
b.
c.
d.
The number of bonds in the replicating portfolio.
The number of calls in the replicating portfolio.
The number of shares in the replicat
FIN 601:
Derivatives
Lecture 10.
Exotic and Credit Derivatives
By Eric Terry
Overview
Exotic derivatives
Valuation of exotics
Credit derivatives
Credit default swaps
CDS exotics
Basket CDSs
Total return swaps
Securitization
Review questions
2
Exotic De
FIN601
Derivatives
Eric Terry
10. Exotic and Credit Derivatives
Practice Exercises
MCQ
1. Which of the following is NOT characteristic of exotic options?
a.
b.
c.
d.
They trade OTC.
They have less model risk than simple options.
They are subject to defaul