Economics 136
	Financial Markets and Modeling:  Futures, Options, and other Derivatives
	Course Calendar
	Fall 2008
		Revised Nov 10 to switch Modules 7 and 9. This is final.
Mod	Date	Lecture and Reading Topic	Reading Assignment
1	Sep 2-9 3 lectures	Introduction to derivatives: Introduction to class, brief intro to futures, and forward contracts, settlement, the markets and how they work, quotations and online sources, crude oil futures markets, introduction to risk and risk evaluation, discounting review.	Hull: Ch 1,2
2	Sep 11-18 3 lectures	Hedging and interest rate theory: Hedging and hedging examples, reasons for hedging, minimum variance hedge ratio, calculating zero rates and forward rates, yield-bearing asset pricing, duration, convexity, term structure of rates.	Hull: Ch 3,4
3	Sep 23-30 3 lectures	Arbitrage and forward and futures pricing, stock index, foreign currency, and interest rate futures: Arbitrage and how arbitrage impacts derviatives pricing and pricing limits, carry costs, backwardation, expected future spot prices.	Hull: Ch 5,6
	October 2	First Exam	Begin reading Lowenstein after exam
4	Oct 7-14 3 lectures	Options and Option Trading Strategies: Puts and calls,hedging, writing covered calls, spreads, staddles, butterflies and other option strategies.	Hull: Ch 8,9,10
5	Oct 16-28 3 lectures	Volatility and the Greeks: Candlestick, EWMA, GARCH and other volatility models. Estimate and importance of delta, gamma, theta, rho, and delta hedging.	Hull: Ch 17,21
6	Oct 30 - Nov 4 2 lectures	Swaps: Interest rate and credit risk swaps, swap valuation and the role of credit risk.	Hull: Ch 7
	November 6	Second Exam	Complete Lowenstein before final
7	Nov 11 - 20 4 lectures	Stochastic Processes and Modeling Options: Weiner process, Ito process, Black Scholes.	Hull: Ch 12,13
8	Dec 2-9 3 lectures	CMOs, Credit Risk and Credit Derivatives: Evaluating credit risk and creating credit derivatives from credit risk. The subprime meltdown and other mistakes.	Hull: Ch 22,23
	December 11	Final Exam