Homework 4
Due Monday October 19 at 6:00pm. On paper.
1. Write the following dierentiable functions in the integral form
t
f (t) = x +
b(s)ds.
0
Example f (t) = cos(t)
If we plug in 0 for t in the int
Midterm Exam October 26, 2015
INSTRUCTIONS:
You may use notes and calculators.
You may not use textbooks, computers, phones, smart watches, or anything that is
connected to the internet.
Write all
Practice Midterm October 19, 2015
NOTE: This is way more questions than the real exam will be.
1. The spot price of gold today (October 19) is $1177 per ounce. The risk-free rate of
interest (compound
CHAPTER 1
18
the positiOn where they face risk associated with the price of an asset. They use
derivatives to reduce or eliminate this risk. Speculators wish to bet on future movements
in the price of
Homework 4
Due Tuesday October 13 at 6:00pm. On paper.
Hull 13.5
Hull 13.14
Hull 13.21
1. This problem is about the dierences between E(|Fn ) and E(|Xn ). Let Xn be
a simple symmetric random walk. Let
Missing Data & How to Deal: An
overview of missing data
Melissa Humphries
Population Research Center
Goals
Discuss ways to evaluate and understand missing data
Discuss common missing data methods
Know
Fundamentals of Risk Management
Market Risk Management
Measures of Market Risk
Value-at-Risk
1. Measures of Market Risk
Classical measures of risk: portfolio standard deviation, duration and convexit
Homework 3
Due Monday October 5 at 6:00pm. On paper.
1. Let 1 , 2 , . be independent identically distributed random variables with discrete
distribution
1
1
P (i = .1) = , P(i = .05) = .
2
2
Let X0 =
Homework 7
Due Monday November 16 at 6:00pm. On paper.
1. At time t, the value of a long forward contract with delivery price K and delivery
date T is
V (t, S(t) = S(t) Ker(T t) .
What is the of a for
Homework 10
Due Monday December 7 at 6:00pm. On paper.
Hull 7.1
Hull 7.3
Hull 7.9
Hull 7.22
Hull 7.23
6. Some time ago you purchased a oating rate bond with principal of $100 that pays
coupons of the
Homework 3
Due Monday November 9 at 6:00pm. On paper.
1. Create your own BSM calculator in Excel or Google Drive. Make columns
1
2
A
S(0)
B
r
C
T
D
K
E
sigma
F
c
G
p
In cell F2, enter the formula for
Homework 8 Due Monday November 23 at 6:00pm. On paper.
1. Properties of stochastic integrals. Let i be a sequence of independent identically
distributed N (0, .01) random variables. Let g(x) be any bo
Practice Midterm December 7, 2015
NOTE: This is way more questions than the real exam will be.
1. Consider a security on a non-dividend-paying stock that pays $10 if the stock price
is above $50 in th
The Greek letters and the volatility smile
Mickey Salins
Boston University
November 9, 2015
Mickey Salins (BU)
Hull 19 & 20
November 9, 2015
1 / 32
Hedging a call option
A European call option on a st
11 MARCH 2010
FROM MOODYS KMV
CDS-implied EDF Credit Measures
and Fair-value Spreads
Authors
Abstract
Douglas Dwyer
In this paper, we present a framework that links two commonly used risk metrics:
def
A Non-Quantitative
Introduction to EDF~
Terry Tse
Moodys KMV
Last Modified: 5/1/02
3)
A Non-Quantitative Introduction to EDPs
Last Modified: 511/02
1. INTRODUCTION
The purpose of this document is to p
Problems with OLS
Considering :
Y i = + X i + u i
we assume
Eu i = 0
Eu 2 = 2 or varu i = 2
i
Eu i u j = 0 or covu i , u j = 0
We have seen that we have to make very specific assumptions about u i in
CHAPTER 2
Mechanics of Futures Markets
Practice Questions
Problem 2.8.
The party with a short position in a futures contract sometimes has options as to the precise
asset that will be delivered, where
11
Introduction
Figure 1.3 Net prot per share from (a) purchasing a contract consisting of
100 Google December call options with a strike price of $880 and (b) selling a contract
consisting of 100 Goo
CHAPTER 3
Hedging Strategies Using Futures
Practice Questions
Problem 3.8.
In the Chicago Board of Trades corn futures contract, the following delivery months are
available: March, May, July, Septembe
CHAPTER 5
Determination of Forward and Futures Prices
Practice Questions
Problem 5.8.
Is the futures price of a stock index greater than or less than the expected future value of the
index? Explain yo
CHAPTER 10
Properties of Stock Options
Practice Questions
Problem 10.8.
Explain why the arguments leading to putcall parity for European options cannot be used to
give a similar result for American op
CHAPTER 12
Introduction to Binomial Trees
Practice Questions
Problem 12.8.
Consider the situation in which stock price movements during the life of a European option
are governed by a two-step binomia
1
Probability Spaces
Nobody can exactly predict the future, but we can often quantify the likelihood that a
particular set of events will occur. Probability theory provides a rigorous mathematical
fra
CHAPTER 11
238
Consider a dividend whose ex-dividend date is during the life of an option. The value of
the option is negatively related to the size of the dividend if the option is a call and
positiv
105
Determination of Forward and Futures Prices
5.2
SHORT SELLING
Some of the arbitrage strategies presented in this chapter involve short selling. This
trade, usually simply referred to as shorting,
13
C H A P T E R
Binomial Trees
A useful and very popular technique for pricing an option involves constructing a
binomial tree. This is a diagram representing dierent possible paths that might be
fol
3
C H A P T E R
Hedging Strategies
Using Futures
Many of the participants in futures markets are hedgers. Their aim is to use futures
markets to reduce a particular risk that they face. This risk migh