All Finance 4366 readings are required unless they are indicated as “Optional”. Short (10-minute) quizzes will be administered via Canvas, starting 24 hours prior to the beginning of class on each of the dates shown for the required readings.
We will follow the reading schedule given below:
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Date
|
Reading
|
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January 19
|
1. Calculus and Optimization, by James R. Garven
2. How long does it take to double (triple/quadruple/n-tuple) your money?, by James R. Garven |
|
January 24
|
1. The New Religion of Risk Management, by Peter Bernstein
2. Normal and standard normal distribution, by James R. Garven
3. Mean and Variance of a Two-Asset Portfolio, by James R. Garven |
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January 31
|
1. Hull Chapters 1 (“(Introduction”), 2 (“Mechanics of Futures Markets”), 10 (“Mechanics of Options Markets”)
2. Futures and Options Markets (Optional), by Gregory J. Millman |
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February 2
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1. Hull Chapter 5 (“Determination of Forward and Futures Prices”)
2. A Simple Model of a Financial Market, by James R. Garven |
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February 9
|
1. Hull Chapter 11 (“Properties of Stock Options”)
2. Properties of Stock Options Chapter synopsis, by James R. Garven |
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February 14
|
Hull Chapter 12 (“Trading Strategies Involving Options”) |
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February 23
|
1. Hull Chapter 13 (“Binomial Trees”)
2. Binomial Option Pricing Model (single-period), by James R. Garven
3. Dynamic Delta Hedging Numerical Example (calls and puts), by James R. Garven
4. Dynamic Replicating Portfolio Numerical Example (calls and puts), by James R. Garven
5. (Optional) Teaching the Economics and Convergence of the Binomial and Black-Scholes Option Pricing Formulas, by James R. Garven and James I. Hilliard |
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March 21
|
Early Exercise of American Call and Put Options on Non-Dividend Paying Stocks, by James R. Garven |
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March 30
|
1. Hull Chapter 14 (“Wiener Processes and Ito’s Lemma”)
2. Applying Ito’s Lemma to determine the parameters of the probability distribution for the continuously compounded rate of return, by James R. Garven
3. Geometric Brownian Motion Simulations, by James R. Garven |
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April 6
|
Actual versus Risk Neutral Probability of a Call Option Expiring in the Money, by James R. Garven |
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April 18
|
1. Hull Chapter 15 (“The Black-Scholes-Merton Model”)
2. Geometric Brownian Motion, Ito’s Lemma, and Risk Neutral Valuation, by James R. Garven
3. Risk Neutral versus ‘True’ Probability of Default, by James R. Garven
4. (Optional) Derivation and Comparative Statics of the Black-Scholes Call and Put Option Pricing Equations, by James R. Garven |
|
April 27
|
1. Hull Chapter 19 (“The Greek Letters”)
2. Black-Scholes-Merton Call and Put Equations and Comparative Statics, by James R. Garven |