## Option Pricing (1432/GHP)

Time and place:

 Lecture: (20 309 V2) Thu, 11-13, G22A-020 Tutorial: (20 310 Ü2) Thu, 15-17, G22A-020   The tutorial starts on April 17.   On April 10 there will be a lecture instead of the tutorial. Since there will be no lectures on June 20 and 27 the lectures and tutorial will be held 105 min hours (starting at 11.00 resp. 15.00). Final Exam: Thu, Aug.1, 2002, 15-16

Overview:

The course covers the basic principles of option pricing. In particular, we will discuss the Binomial Model, the Black-Scholes Model as well as some extensions.

Chapter outline:

1. Introduction
3. Properties of Stock Option Prices
4. Binomial Trees and Risk-neutral Valuation
5. The Black-Scholes Model
6. Options on Stock Indices, Currencies, and Futures
7. The Greek Letters
8. Interest Rate Derivatives

Text:

### Agenda

Source for slides: John Hull, Options, Futures, and Other Derivatives (4th ed.), and Fundamentals to Futures and Options Markets (4th ed.)

last update of file in the copy shop: Wed, May 29, 1.15 p.m.
(I noticed that slides 5 (Hull, ch.11) are missing, I will add them soon.)

 Date Topic Text April 11, 2002 Introduction (slides1 - last update: April 9, 2002) Hull, ch. 1, 2.1-2.3, 5.1, 6 Hull - IFOM, ch. 1 EUREX Brochure April 18, 2002 Trading strategies (slides2)   Properties of Stock Option Prices (slides3)   problems 1-13   In the file in the copy shop you find options quotes from April 12. Hull, ch.8, 7 April 25, 2002 Binomial model (slides4)   problems 14-21 Hull, ch.9 May 2, 2002 Binomial model (cntd.)   problems 22-32 (corrected: 30.4., 3.10 p.m.)   correction of problem 25: stock price: 64 (instead of 47), risk-free interest rate: 12% (instead of 6%) Hull, ch. 16.1 May 16, 2002 Binomial model (cntd.)   Behavior of stock prices (slides4a)   problems 22, 30, 31, 32c, 33-36 Hull, ch. 10.1,4-5, 11 May 23, 2002 Black-Scholes Model (slides5)   problems 30, 31, 34, 37-42 Hull, ch. 11 Benninga, parts III and V (implementing problems in Excel) May 30, 2002 Black-Scholes Model   Volatility   problems 38-44   (note the correction/supplement in problems 42 and 43!) Hull, ch. 11 June 6, 2002 Volatility Smiles (slides6)   Option pricing when the underlying pays dividends   (note: slide no.29 from "slides4" has been moved to "slides5")   no tutorial Hull, ch. 17.1-6, 17.10, 11.12, 16.3 June 13, 2002 Options on stock indices, currencies, and futures (slides7)   problems 45-49 Hull, ch. 12, 16.2 June 20, 2002 no lecture June 27, 2002 no lecture July 4, 2002 Options on stock indices, currencies, and futures   The Greek Letters (slides8)   (in the afternoon: lecture instead of tutorial) Hull, ch. 12, 16.2   (for facts about futures see ch.3);   13, 16.1 (second part) July 11, 2002 problems 50-62