Financial
Economics - Valuation and Derivatives
Draft Course Outline and Calendar June 25, 2001 [Note:Homework assignments will be given out nearly every day]. |
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Day | Lecture and discussion topics | Reading and Homework Assignments | Quiz |

1,2 | Module 1 - Introduction to class, basics of present value, compounding and discounting formulas (discrete and continuous), measures of risk (variances, betas, etc.) | Hull: Ch 1 | N |

3 | Module 2 - Options basics: puts and calls, index options, hedging strategies, writing covered calls, finding options to track. | Hull: Ch 7, 8 | N |

4,5 | Module 3 - Futures and Forwards market basics: Contracts, settlements, delivery, the markets, differences between commodities, metals, fuels, indexes and financials. Arbitrage and the effect upon price, hedging and hedging strategies, basis risk. | Hull: Ch 2,3,4 | D4 |

6 | Module 4 - Review of valuation, including discounting free cashflow, traditional valuation methods, new internet valuations | Y | |

7 | Module 5 - Financial Futures and Interest Rate Hedges, including review of yield-bearing asset valuation, bond futures contracts, CBOT tables, bill and note futures, the relationship between interest rates and futures, using futures to hedge rates. | Hull: Ch 5 | N |

8 | Module 6 - Currency Futures, including discussion of linkage to relative real interest rates, performance and hedging options, real-world case studies. | Hull: Ch 12 | Y |

9 | Module 7 - Options on Futures. Definition, description of contracts, links to futures, examples of applications, hedging examples. | Hull: Ch 13 | N |

10 | Module 9 - Options and Futures Pricing Models. Advanced volatility calculations, Black-Scholes Model, review of material for exam. | Hull:Ch 11 | N |