Financial Markets and Modeling, Futures, Options, and other Derivatives
Lecture Slides for Spring 2013
These linkages below are for the PowerPoint slides used in lectures for this class. They are provided as a courtesy to students enrolled in the class in case you want color version of the slides handed out in class. Although I hand out hard-copy versions of these slides (of much lower quality), as an effort to conserve paper and printing resources, I urge you to try to use these slides rather than the ones given out in class - again, they are same and these are better quality.
These lecture slides are protected by copyright laws, with restrictions described on the title slide.
Throughout the semester these slides will be posted as they become available.
The Great Rotation (2013) [Mandatory reading assignment about the Great Rotation discussed in class]
[Mandatory] Brent futures flip rolls up big profits FT Feb 27, 2013 - includes backwardation image at end
Dynamic Modeling Part 2 Lecture 8b (also represented below as a video lecture)
[Mandatory video] Dynamic Modeling Part 2
[Video] Final exam review (all students should review, even those working on projects, because it has information about the take-home final and due dates for the projects).
Final exam review (PowerePoint version without sound)
The Final Take-Home Exam [due May 9, 5:00 PM, all students]
Homework and Other Assignments
Homework for this semester, 2013
Homework 1 - Calculating Log Continuous Growth Rates from data for SPY
††††††††††† [Note: The inclusive range of dates for the data download for this assignment is 2/2/2012 to 2/4/2013. This is noted here rather than in the assignment so I donít have to keep changing the homework assignment merely to assign new dates. You will see what I mean when you read the assignment].
††††††††††† Instructions on how to download historical price data (video) [Review this before trying to download data].
Detailed instructions on how to do the Financial Prices SD Calculation for SPY (choose this or the quick and dirty)
††††††††††† Quick and dirty instructions for Financial Prices SD Calculations for SPY (optional)
††††††††††† Historical Volatility Step 1 Excel workbook zipped (required)
††††††††††† The desired result from this homework (video) (do not review until completing the homework)
Homework 2 - Calculating MVHR for Jet Fuel and Correlation for TLT and JNK
††††††††††† NOTE: We are using the same HW with the same data (already loaded) as in 2012 because the application and principle learned is the same. We will update the TLT/JNK data after the exam.
††††††††††† Homework instructions (video file)
††††††††††† Minimum Variance Hedge Ratio Excel workbook zipped
Homework 3 - Calculating Zero and Forward Rates and Duration (must be completed by the week after Spring Break)
††††††††††† Calculating Zero Rates, Forward Rates and Duration (assignment in text - read first)
††††††††††† Zero Forward Duration Rates ZFD Excel workbook zipped
Homeworks 4 and 5 - Calculating Daily Volatility and Historical Alphas (HW4) and Strike Price Probabilities
††††††††††† Video instructions for Homeworks 4 and 5 (low definition 13 MB)
††††††††††† Video instructions for Homeworks 4 and 5 (same as above but high definition 26 MB)
††††††††††† Video slide set for Homeworks 4 and 5 (for optional use without the video sound)
††††††††††††††††††††††† These files below are explained in the video instructions:
††††††††††† NormBase (Excel workbook in zip file for background use and information - not directly used in homework)
††††††††††† SPPC (Strike Price Probability Calculator)
Homework 6 - Student Options Price Calculator
††††††††††† Student Option Pricer (zipped Excel workbook to be used to for the Options Pricing Calculator)
Homework 7 - Iron Condor Spreads
††††††††††† Iron Condor Spread (zipped Excel workbook designed for sensitivity analysis)
††††††††††† Iron Condor Sensitivity Spread Instruction Video
††††††††††† Iron Condor Video Slide set (the slide set in pdf format without sound)
Additional Reading not elsewhere found
††††††††††† Jump Diffusion Model for Options Pricing (by S.G. Kow, adds Poisson distribution to Ito model)
††††††††††† What Happened to the Quants in August 2007 (by Khandani and Lo, mostly about the stat arb meltdown)
††††††††††† Credit Default Swaps (by Richard Skora, a good article that explains how credit default swaps work, something we don't cover in this class)
China Stuff (all optional)
Unrestricted Warfare (if interested, speed-read chapter 5 and after for their views about finance).
The Revenge of Wen Jiabao (a detailed Foreign Policy story about the long roots of the purge).
A Chilling End in Chongqing (Financial Times story about the Heywood murder and possible links to the Bo purge).
China Reins in Bo Xilai Chatter Online (Wall Street Journal Story about censorship after the purge)
Mandiant Chinese Espionage Report February 2013 (Extensive evidence of PLA cyberespionage)