Yesterday’s Midterm Exam 1 Booklet and Solutions are now available for download from the course website.

# Category Archives: Announcements

# The Formula Sheet for Finance 4366 Midterm Exam 1 (scheduled for tomorrow, 11-12:15 in Foster 226) is now available…

… at http://fin4366.garven.com/spring2020/formulas_part1.pdf. This document will be appended to the back of the exam booklet. I recommend that y’all familiarize yourselves with this formula sheet sometime prior to tomorrow’s exam.

# Sample Midterm Exam 1 is available

In preparation for class on Thursday, please work through this “sample” midterm 1 for Finance 4366. Actually, this was midterm exam 1 for Finance 4366 during the spring 2019 semester, which is the last time I taught this course. If there is a demand for it, I can devote part of the review session to working through and explaining the problems on this exam.

# Friendly reminder about this week’s assignments in Finance 4366

As I indicated in Saturday’s blog posting entitled “Problem Sets 4 and 5 are now available!”, Problem set 4, which is based on the “Properties of Stock Options” reading and lecture note, is due at the beginning of tomorrow’s Finance 4366 class meeting. Also, class will begin tomorrow with a quiz based on the assigned reading, which is Hull’s “Trading Strategies Involving Options” chapter.

On Thursday, Problem set 5, which is based on the “Trading Strategies Involving Options” reading and lecture note, will be due. That class meeting will be devoted to a review session for Midterm Exam #1, which is scheduled to occur in class on Tuesday, February 18.

# Problem Set 3, due Thursday, 2/6, is now available

I just posted Problem Set 3 on the course website. It is due at the beginning of class on Thursday, 2/6, and it is based on material that we will cover during tomorrow’s class meeting.

# Finance 4366 Grades on Canvas

I have posted Finance 4366 numeric course grades to Canvas; the FIN 4366 grade book is at https://baylor.instructure.com/courses/108333/gradebook. To date, we have had five class meetings, three quizzes (two of which have been graded), and three problem sets (problem sets 1, 2, and the student questionnaire which was graded on a (0, 100) basis; the grade for problem set 2 is still pending). Since we haven’t had any exams yet, the course grade which now appears on Canvas was calculated using the following equation:

**Current Course Numeric Grade** = (.10(Class Attendance) + .10(Quizzes) + .20(Problem Sets))/.4

Or course, this is simply a special case of the final course numeric grade equation given in the course syllabus:

**Final Course Numeric Grade** = .10(Class Attendance) + .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 time passes and I continue to collect grade data from you, the grades as reported on Canvas will be posted on a timely basis. Once Midterm 1 grades are determined, then the Canvas course grade will be calculated using the following equation:

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

Once Midterm 2 grades are determined, then the following equation will be used:

**Course Numeric Grade** **after Midterm 2 **= (.10(Class Attendance) + .10(Quizzes) + .20(Problem Sets) + .20(Midterm 1) + .20(Midterm 2))/.8

After I record final exam grades, I will use the Final Course Numeric Grade equation above to determine your final course numeric grade, and (as also noted in the course syllabus), the final course letter grade will be based upon the following schedule of final course numeric grades:

A | 93-100% | C | 73-77% |

A- | 90-93% | C- | 70-73% |

B+ | 87-90% | D+ | 67-70% |

B | 83-87% | D | 63-67% |

B- | 80-83% | D- | 60-63% |

C+ | 77-80% | F | <60% |

# Problem Set 2 question

Here’s a brief Q&A that I had last evening with a student about Problem Set 2:

Q: Hi Dr. Garven, I was wondering if I should use =stdev.p or =stdev.s when solving for the standard deviation on Excel. I understand this is a sample so =stdev.s is the formula I presume that I should use but I’m not quite sure. Which should I use?

A: Neither – the “=stdev.p” and “=stdev.s” commands in Excel are useful for calculating the standard deviation of observed *realized* values of a random variable. In problem set 2, the investor contemplates *expectations* of *future* state-contingent returns on securities. Since standard deviation is the square root of the variance, start by calculating variance (see p. 9 of the Statistics Tutorial, Part 1 lecture note).

# Substantial revision of the “Introduction to Options, Futures, and Other Derivatives” Lecture Note

I just posted a substantial revision of the “Introduction to Options, Futures, and Other Derivatives” Lecture Note. If you have previously (prior to this very moment) downloaded this document, please replace it with this new version. You can tell it is the new version by the appearance of its title page:

# New (1 page) reading entitled “Mean and Variance of a Two-Asset Portfolio”

I just posted a new (1 page) reading entitled "Mean and Variance of a Two-Asset Portfolio" which (not surprisingly) explains the origins of the formulas for mean and variance of a two-asset portfolio. I expect you’ll find such knowledge very helpful in understanding and completing the 4th and 5th sections of the Statistics Class Problem as well as parts D, E, and F of Problem 1 and part B of Problem 2 in Problem Set 2.

# Volatility, now the whole thing

I highly recommend John Cochrane’s January 2019 article entitled “Volatility, now the whole thing” which builds and expands upon yesterday’s implied volatility topic in Finance 4366. Dr. Cochrane is a senior fellow at Stanford University’s Hoover Institution and was formerly a finance professor at Univ. of Chicago. Cochrane’s article provides a broader framework for thinking critically about the implications of volatility for future states of the overall economy. This article is well worth everyone’s time and attention, so I highly encourage y’all to read it!