Basic Properties of Stock Options
Options and Futures
The properties of option prices depend on:
Note #5
Whether the option is a call or a put
Whether the option is American or European
The amounts of dividends (if any)
Narat Charupat
October 2016
Nota
Issues in Hedging Using Futures Contracts
Options and Futures
Note #3
Hedges where a long (short) position is taken in a
futures contract are known as long (short) hedges.
Ex. Kellogg wants to hedge the prices of corn.
Narat Charupat
September 2016
1. Bas
Pricing of Stock Options Binomial
Trees
Options and Futures
Note # 6
1. Introduction
Recall that there are 6 factors affecting option
prices S0 , K, T, , r and D.
Can create models to link option prices to the 6
factors
Narat Charupat
November 2016
First,
Interest Rates and Their Derivatives
Options and Futures
Note # 4
Narat Charupat
September 2016
Interest rate forward and futures contracts are
agreements on
the price at which we will buy/sell at a future time, securities
whose values depend on interest
1. Introduction
Options and Futures
Note #1
Basic Finance Concepts
Short sales
Arbitrage
Pricing by Equilibrium vs. by Arbitrage
Narat Charupat
DeGroote School of Business
September 2016
1.1. Short Sales
Short sales involve selling assets (securities or
c
Forward and Futures Contracts
Options and Futures
Issues to be discussed:
Note #2
Narat Charupat
September 2016

Calculations of forward/futures prices and contract values

Patterns of forward/futures prices

The mechanics of futures contracts

Forwar
CHAPTER 1
Problem 1.1.
What is the difference between a long forward position and a short forward position?
When a trader enters into a long forward contract, she is agreeing to buy the underlying asset
for a certain price at a certain time in the future.
Options and Futures
Note # 7
Narat Charupat
November 2016
The Black Scholes Option Pricing Formula
The Behavior of Stock Prices
What are desirable properties of a process for
stock price?
(i)
random (stochastic)
(ii) reflects the level of market efficienc