Time value of money. FV, PV, annuities, perpetuities
Professor Pierre-Olivier Weill
1
Last time
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Economics 106V
Investments
Lecture 14
The Binomial Pricing Model
Dr. Randall R. Rojas
1
Todays Class
The Binomial Pricing Model
A Two-State Single-Period Model
The Binomial Pricing Formula
A Multiperiod Model
2
The Binomial Option Pricing Model
Prici
Economics 106V
Investments
Lecture 12
Options and Derivatives
Dr. Randall R. Rojas
1
Todays Class
The Option Contract
Values of Options at Expiration
Option Strategies
Protective Put
Covered Calls
Straddle
Spreads
Collars
2
The Option Contract
1 of 3
Economics 106V
Investments
Lecture 13
Valuation Prior to Expiration
Dr. Randall R. Rojas
1
Todays Class
The Put-Call Parity Theorem
Stocks without Dividends
Stocks with Dividends
The Intrinsic Value of a Call Option
The Minimum Value of a Call Option
Economics 106V
Investments
Lecture 11
The Yield Curve/Duration
Dr. Randall R. Rojas
1
Todays Class
Bond Sectors
Yield Spreads
The Yield Curve (Term-Structure of Interest)
Definition
Constructing the Yield Curve
Shapes of the Yield Curve
Theories on
Return Measures
Professor Pierre-Olivier Weill
1
Last time
From PV to FV and vice versa
PV of zero-coupon bond
It is also the price
Proof: arbitrage!
Pricing coupon bond
As a package of zero coupon bonds
Annuity and perpetuity
Bond prices decrease wi
Wear suit for class 1. Make joke about name. Introduce myself briefly (Stanford
PhD / NYU Stern - research interest: asset pricing, real estate, and liquidity)
Our class meets twice per week in this room. If necessary there may be one or two
extra review
Portfolio Returns
with Two Risky Securities
Professor Pierre-Olivier Weill
1
Last time: return measures
How do bank quote interest rates
Holding period return
Investing in stocks
Investing in bonds
Short-selling stocks
Internal rate of return
2
Toda