Author: drgarven

Posted on

Extra Credit Opportunity: “The Campus Conformity Gauntlet”


I’m offering an optional extra credit activity for students enrolled in Finance 4366. This opportunity involves attending and reporting on a presentation titled “The Campus Conformity Gauntlet” by Greg Lukianoff, the President and CEO of the Foundation for Individual Rights and Expression (FIRE).  Mr. Lukianoff’s presentation is scheduled for Tuesday, April 23, beginning at 5:15 pm in Foster 240.

The presentation will discuss themes from Lukianoff’s recent book with Rikki Schlott, titled “The Canceling of the American Mind: Cancel Culture Undermines Trust and Threatens Us All-But There Is a Solution” (Simon & Schuster, 2023). It will examine how the suppression of free speech and the erosion of academic freedom, compounded by the pressure to conform in the realm of higher education, pose a significant threat not just to the academic community but to the very fabric of our democratic society.

Greg Lukianoff is not only the head of FIRE, but also a recognized attorney and author, with several New York Times bestsellers to his name. His notable works include “Unlearning Liberty: Campus Censorship and the End of American Debate,” “Freedom From Speech,” and along with NYU Professor Jonathan Haidt, “The Coddling of the American Mind: How Good Intentions and Bad Ideas Are Setting Up a Generation for Failure.” Lukianoff has also served as an executive producer on documentaries such as “Can We Take a Joke?” (2015), which examines the clash between humor, censorship, and the culture of outrage, and “Mighty Ira: A Civil Liberties Story” (2020), a documentary focusing on Ira Glasser, a former ACLU Executive Director.

If you take advantage of this opportunity, I will use the grade you earn on your report to replace your lowest quiz grade in Finance 4366. For this assignment, prepare a 2-3 page executive summary offering a thoughtful critique of Mr. Lukianoff’s presentation. To receive credit, the report must be submitted through Canvas in PDF format by 5 p.m. on Friday, April 26.

Posted on

American Options and Wiener Processes Asynchronous Lecture

Finance 4366 will not meet in person tomorrow, Thursday, March 21, due to ongoing health-related issues in my family.  Therefore, tomorrow’s “American Options and Wiener Processes” lecture will be delivered asynchronously. As in past asynchronous lectures, class participation credit will be awarded to students who write and upload a lecture synopsis to Canvas, the deadline for which is Friday, March 22 by 5 pm.

In my March 19th lecture, we learned that the early exercise of an American call option may be optimal when the underlying asset pays dividends.  In this lecture, we finish our coverage of discrete-time financial modeling in which the passage of time is measured over distinct and separate intervals (ranging from seconds to days, months, or even years), and consider financial modeling in the more realistic continuous-time framework in which the passage of time occurs over infinitesimally small time intervals.  Hull’s “Wiener Processes and Ito’s Lemma” textbook chapter (the teaching note for which is available at http://fin4366.garven.com/spring2024/lecture10.pdf) is named after the two math/stat-based methods required to understand continuous-time finance, particularly the groundbreaking (and Nobel prize-winning) Black-Scholes-Merton model, which revolutionized the pricing of options and derivatives.

Tomorrow, I plan to be available for office hours via Zoom from 3:30-5, if any of my students would like to come by.

Posted on

American Options, Part 2 notation

The lecture not upon which yesterday’s lecture, “American Options, Part 2,” is based (Effects of Dividends on the Pricing of European and American Options) , uses some notation that may seem unfamiliar.  Specifically, I am referring to the notation for terminal node call option payoffs that use the following syntax: C(T) = (S(T)-K)+. This is an abbreviation for C(T) = Max(0, S(T)-K). Furthermore, this PDF uses discrete rather than continuous compounding.

 

Posted on

American Options, Part 2 Asynchronous Lecture

Finance 4366 will not meet in person tomorrow, Tuesday, March 19, due to ongoing health-related issues in my family.  Therefore, tomorrow’s “American Options, Part 2” lecture will be delivered asynchronously. As in last week’s asynchronous lectures, class participation credit will be awarded to students who write and upload a lecture synopsis to Canvas.

In my March 14th lecture, I showed how Cox-Ross-Rubinstein (CRR) binomial option pricing model prices and probabilities converge toward Black-Scholes-Merton (BSM) continuous-time model prices and probabilities. Additionally, I began the first of two discussions on American option pricing. Unlike European options, which can only be exercised on their expiration date, American options can be exercised anytime between the contract’s start and expiration. We focused on American options for stocks that don’t pay dividends and observed that while it might be optimal to exercise an in-the-money put option early, it will never be optimal to exercise an American call option written against a non-dividend-paying stock.

In American Options, Part 2, we’ll explore scenarios where the early exercise of an American call option may be optimal when the underlying asset does pay dividends. It draws heavily from the Effects of Dividends on the Pricing of European and American Options teaching note.

Posted on

Midterm 1 and Current Course Grades in Finance 4366

I have uploaded the Midterm 1 Exam grades and current (March 16) attendance/participation, quiz, problem set, and Finance 4366 course grades to Canvas.

As stated in the course syllabus, final numeric course grades will be determined according to the following equation:

Final Course Numeric Grade =.10(Attendance and Participation) +.10(Quizzes) +.20(Problem Sets) + Max{.20(Midterm Exam 1) +.20(Midterm Exam 2) +.20(Final Exam),.20(Midterm Exam 1) +.40(Final Exam),.20(Midterm Exam 2) +.40(Final Exam)}

As I noted in my January 29th blog posting entitled “Finance 4366 Grades on Canvas”, as the spring semester progresses and I continue to collect grades in the attendance, quiz, problem set, and exam categories, then the course grade listed on Canvas will dynamically incorporate that information for each student; now that I have posted the Midterm 1 Exam grades, the equation that I am now using (until Midterm 2) is:

Course Numeric Grade after Midterm 1 = (.10(Attendance and Participation) +.10(Quizzes) +.20(Problem Sets) +.20(Midterm 1))/.6

There are n = 18 students enrolled in Finance 4366. Here are the current grade statistics, broken down by grade category:

Although actual letter grades won’t be assigned until after the final exam, hypothetically, you can determine where your course letter grade currently stands by comparing it with the course letter grade schedule that also appears in the course syllabus:


If you are disappointed by your performance to date in Finance 4366, remember that the final exam grade automatically double counts in place of a lower midterm exam grade. If both midterm exam grades are lower than the final exam grade, the final exam grade replaces the lower of the two midterm exam grades.

If any of you would like to chat with me about your grades in Finance 4366, then by all means, stop by my office (Foster 320.39) 3:30-4:30 pm TR or set up a Zoom appointment with me.

Posted on

Problem set 6 important hints

The deadline for Problem Set 6 has been moved from 2 pm today to 5 pm tomorrow.

In problem set 6, problems 1 and 2 feature the same time to expiration, T = 1 year. For problem 1, we define T= \delta t, while for problem 2, T= 2\delta t.  Broadly, this sets the stage for examining the dynamics between the discrete-time Cox-Ross-Rubinstein (CRR) model and the continuous-time Black-Scholes-Merton (BSM) model, where T= n\delta t, and n corresponds to the number of time-steps that occur from the beginning of the binomial tree to the array of terminal nodes that exist at the expiration date T.  As you will see toward the end of today’s lecture, CRR model prices and probabilities converge to  BSM model prices and probabilities as the number of time steps becomes arbitrarily large.

Furthermore, as the number of steps, n, increases, \delta t becomes smaller. This leads to a corresponding decrease in the risk-neutral probability q and adjustments to the up (u) and down (d) factors.

Posted on

March 14 Video Lecture titled “CRR to BSM, American Options Part 1”

In an earlier blog posting titled “This week, Finance 4366 will proceed asynchronously!”, I referenced the status for Thursday’s video lecture as “TBA”; i.e., to be announced. So, here’s the announcement I promised:

Thursday, March 14 (due Friday, March 15 by 5 pm): Watch and turn in a synopsis of the video lecture titled “CRR to BSM, American Options Part 1”. This lecture completes coverage of the Binomial Trees (particularly, how the discrete-time Cox-Ross-Rubinstein (CRR) binomial option pricing model converges to the continuous-time Black-Scholes-Merton (BSM) option pricing model. It also provides the first installment of our coverage of American options, based on the lecture note titled Early Exercise of American Call and Put Options on Non-Dividend Paying Stocks.

Posted on

Video Lecture Synopsis

A couple of students from Finance 4366 have reached out inquiring about the contents of a synopsis. A synopsis should encapsulate a condensed overview of the lecture. Within your overview, enumerate the subjects discussed and outline the significant principles connected to these subjects, which you learned from the video lecture.

I have decided to extend the deadline for this particular assignment from 5 pm to 11:59 pm today. Additionally, you have the option to resubmit your synopsis once if you choose to do so.