Basic Numerical Procedures
for the Instructor
Chapter 19 presents the standard numerical procedures used to value derivatives when
analytic results are not avai1 able. These involve binomialjtrinomial trees , Monte Carlo
Employee Stock Options
Why was it attractive for companies to grant at-the-money stock options prior to 2005? What
changed in 2005?
Prior to 2005 companies did not have to expense at-the-money options on the inc
Companies A and B have been offered the following rates per annum on a $20 million fiveyear loan:
Company A requires a floating-ra
Securitization and the Credit Crisis of 2007
What was the role of GNMA (Ginnie Mae) in the mortgage-backed securities market of the
GNMA guaranteed qualifying mortgages against default and created securities
Determination of Forward and Futures Prices
Explain what happens when an investor shorts a certain share.
The investors broker borrows the shares from another clients account and sells them in the
usual way. To cl
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 a
Mechanics of Options Markets
N otes for the Instructor
This chapter provides information on how options markets work. 1 usually go through
the chapter fairly quickly leaving students to read the details for themselves. Points 1
spend time on are
A bank quotes you an interest rate of 14% per annum with quarterly compounding. What is
the equivalent rate with (a) continuous compounding and (b) annual compounding?
(a) The rate with continuous c