Chap 14

Options on Stock Indices, Currencies, and Futures Chapter 14

European Options on Stocks Providing a Dividend Yield ,[object Object],[object Object],[object Object]

European Options on Stocks Providing Dividend Yield continued ,[object Object]

Extension of Chapter 9 Results (Equations 14.1 to 14.3) Lower Bound for calls: Lower Bound for puts Put Call Parity

Extension of Chapter 13 Results (Equations 14.4 and 14.5)

The Binomial Model S 0 u ƒ u S 0 d ƒ d S 0 ƒ p (1  – p ) ,[object Object]

The Binomial Model continued ,[object Object],[object Object],[object Object],[object Object]

Index Options (page 316-321) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

LEAPS ,[object Object],[object Object],[object Object],[object Object]

Index Option Example ,[object Object],[object Object],[object Object]

Using Index Options for Portfolio Insurance ,[object Object],[object Object],[object Object],[object Object]

Example 1 ,[object Object],[object Object],[object Object],[object Object]

Example 2 ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Calculating Relation Between Index Level and Portfolio Value in 3 months

Determining the Strike Price (Table 14.2, page 320) An option with a strike price of 960 will provide protection against a 10% decline in the portfolio value

Valuing European Index Options ,[object Object],[object Object],[object Object]

Currency Options ,[object Object],[object Object],[object Object]

The Foreign Interest Rate ,[object Object],[object Object],[object Object],[object Object]

Valuing European Currency Options ,[object Object],[object Object],[object Object],[object Object]

Formulas for European Currency Options (Equations 14.7 and 14.8, page 322)

Alternative Formulas (Equations 14.9 and 14.10, page 322) Using

Mechanics of Call Futures Options ,[object Object],[object Object],[object Object],[object Object]

Mechanics of Put Futures Option ,[object Object],[object Object],[object Object],[object Object]

The Payoffs ,[object Object],[object Object],[object Object],[object Object]

Put-Call Parity for Futures Options (Equation 14.11, page 329) ,[object Object],[object Object],[object Object],[object Object],[object Object]

Binomial Tree Example ,[object Object],Futures Price = $33 Option Price = $4 Futures Price = $28 Option Price = $0 Futures price = $30 Option Price=?

[object Object],[object Object],Setting Up a Riskless Portfolio 3  – 4 -2 

Valuing the Portfolio ( Risk-Free Rate is 6% ) ,[object Object],[object Object],[object Object],[object Object]

Valuing the Option ,[object Object],[object Object],[object Object],[object Object],[object Object]

Generalization of Binomial Tree Example (Figure 14.2, page 330) ,[object Object],F 0 u ƒ u F 0 d ƒ d F 0 ƒ

Generalization (continued) ,[object Object],[object Object],F 0 u  F 0  – ƒ u F 0 d  F 0  – ƒ d

Generalization (continued) ,[object Object],[object Object],[object Object]

Valuing European Futures Options ,[object Object],[object Object],[object Object],[object Object]

Growth Rates For Futures Prices ,[object Object],[object Object],[object Object],[object Object]

Black’s Formula (Equations 14.16 and 14.17, page 333) ,[object Object]

Futures Option Prices vs Spot Option Prices ,[object Object],[object Object]

Summary of Key Results ,[object Object],[object Object],[object Object],[object Object]

Chap 14

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