Financial Markets and Modeling, Futures, Options, and other Derivatives
Lecture Slides for Spring 2014
These linkages below are for the PDF versions of the PowerPoint slides used in lectures for this class. They are provided as a courtesy to students enrolled in the class. These slides will be posted before the actual lecture. You will be notified by email each time a new set is posted. It is a good idea to refer to these prior to the lecture. Two versions of the slides are made available - one with only one slide per page, useful with tablets on which you can take notes during lectures, and one with two slides per page.
Because alumni and others frequently refer to these slides, an archived set of older slides are kept on this same page (you will see it labeled on down the page). As the semester proceeds, when a new lecture is posted, the old archived vcrsion of it will disappear.
These lecture slides are protected by copyright laws, with restrictions described on the title slide.
Topical Lecture - The Complex Emerging Markets Currency Crisis [1 slide pp only]
Lecture 6 Correlation and Portfolio Risk (original slide set was modified and a homework added to this) [1 slide pp]† (HW set for this is below)
This is experimental and is not guaranteed to work. These will disappear after six weeks.
February 4, 2014 [half a lecture -class worked on HW in second half]
Lost lecture [not sure when this was delivered]
February 13, 2014 [sound missing early, but fixed after a few minutes]
(March 4 lecture too damaged to post)
Homework and Other Assignments
Homework for this semester, 2014
Homework 1 - Calculating Log Continuous Growth Rates and Volatility from data for SPY† [This material is now ready to use in 2014].
††††††††††† [Note: The inclusive range of dates for the data download for this assignment is 2/1/2013 to 1/31/2014. This is 252 observations. This is noted here rather than in the assignment so I donít have to keep changing the homework assignments merely to assign new dates].
††††††††††† Instructions on how to download historical price data (video) [Review this before trying to download data].
††††††††††† Video guidance and instructions for Historical Volatility HW1 
††††††††††† Quick and dirty instructions for Financial Prices SD Calculations for SPY (from 2013, as an optional supplement in case you want to use it).
††††††††††† Historical Volatility Step 1 Excel workbook zipped, does not include the KS Volatility estimator
††††††††††† Historical Volatility Step 1 Excel workbook zipped including the KS Volatility estimator with answers provided.
Homework 2 - Calculating Correlation, Relative Volatility, the Beta, and High-Sigma Measure for SPY vs. CSCO plus one other.
††††††††††† Quick and dirty instructions for HW2 Beta Calculation 
††††††††††† Student Beta and Correlation Master for HW 2 Excel workbook zipped††††
Homework 3 Ė Estimating Portfolio Variation for a 4-stock Portfolio
††††††††††† The initial version of this will be done in class on February 25. Simply download the zip file below and bring it to class.
††††††††††† Portfolio Volatility Calculator (Excel workbook zip file)
Homework 4 - Strike Price Probability Calculator
††††††††††† We will try to do this in class on Thursday, March 6
††††††††††† Video instruction set for Homework 4
††††††††††† Slides used for the Homework 4† (you may want to glance at these before watching the video)
††††††††††† The NormBase transformation model (a zip file with an Excel workbook)
††††††††††† The Strike Price Probability Calculator (a zip file with an Excel workbook)
Archive Lecture Slides from Spring 2013 [for reference by others - not to be used by students in 2014]
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
Additional Reading not elsewhere found (optional)
††††††††††† 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)
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)