Category Archives: Announcements

Information about tomorrow’s midterm exam in Finance 4366

Tomorrow’s midterm exam in Finance 4366 consists of 2 sections. The first section is required of all students and consists 4 multiple choice problems 8 points each. The second section is worth 64 points; it consists of 3 problems in which only two are required. At your option, you may complete all three problems, in which case I will count the two highest scoring problems (worth 32 points each). The maximum possible score on this exam is 100 (96 points possible for sections 1 and 2 and 4 points for including your name on the exam booklet :-)). Furthermore, I just posted the formula sheet for Midterm Exam 1, which will be included as part of the exam booklet. I recommend that y’all familiarize yourselves with this document sometime prior to tomorrow’s exam.

I’d like to make an important point about the formulas provided on the formula sheet for the replicating portfolio approach to option pricing. There, I list replicating portfolio values at inception and at expiration. Keep in mind that this approach involves determining a weighting scheme such that one replicates call or put payoffs by appropriately choosing stock exposure (delta) and bond exposure (beta). At this point in the course, we only allow for two possible option payoffs at expiration; thus, there actually are two equations for the replicating portfolio at expiration. These equations reflect the fact that the value of the underlying asset is different in each possible terminal state. However, since she value of the underlying asset is known at the inception of the option, there is only one equation for the replicating portfolio at that point in time.

Some important reminders for Finance 4366

Tomorrow’s class meeting (Thursday, 2/14) will be devoted to a review session for Midterm Exam #1. The midterm exam will be given in class next Tuesday, February 19. In order to prepare for tomorrow’s review session, I highly recommend reviewing problem sets 2 – 5 (actually, problem set 5 is due tomorrow! 😊) and midterm 1 from Spring 2018; solutions for problem sets in FIN 4366 are available at http://derivatives.garven.com/category/problem-set-solutions/. After class tomorrow, I will post the solutions for problem set 5 and for midterm 1 from Spring 2018.

2019 CFA exam scholarship opportunity (Deadline: January 30, 2019)

In case if any of you are planning on sitting for CFA (Chartered Financial Analyst) exams this coming June and December, you might consider taking advantage of this scholarship opportunity:

Student/Awareness Scholarships

June 2019 and December 2019 CFA Exams

What is it?

The CFA Institute grants “Affiliated Schools” such as Baylor several scholarships per year in accordance with Official Scholarships Rules. Scholarship awards reduce the CFA Program enrollment and exam registration fees to $350, which includes the eBook curriculum.

How to apply?

If you are not enrolled in the CFA Program, you must create a CFA Institute account in order to receive your login information and access the scholarship application. The online application can be found here: https://www.cfainstitute.org/en/programs/cfa/scholarships/student

When is the application deadline?

Candidates should (1) submit the application form on the CFA Institute website and (2) email Brandon_Troegle@baylor.edu prior to January 30, 2019, though earlier applications are encouraged. In the body of the email, please include:

  • A summary statement on why you should be considered for the scholarship. This statement should include what you hope to achieve by pursuing the CFA charter, your career goals, and you can discuss academic achievements/performance including GPA information in you wish.
  • Expected graduation date
  • Major(s)
  • Did you apply for the Access Scholarship (the other scholarship)? If not, why not?
  • Any other information you believe will aid in the scholarship decision

What is the evaluation process and criteria?

Awards will be made based on a combination of factors including interest in and rationale for pursuing the CFA charter, academic accomplishments, and other personal characteristics that indicate the applicant is a strong scholarship candidate.

Grades on Canvas

I have begun posting Finance 4366 numeric course grades to Canvas. To date, we have had three class meetings, two quizzes, and two problem sets (problem set 1 and the student questionnaire which was graded on a (0, 100) basis). The only item on this list which does not yet have recorded grades is problem set 1, which was turned in yesterday. 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

Reminder about tomorrow’s assignments in Finance 4366

Problem Set 1 is due at the beginning of class tomorrow (see the hint that I gave about this problem set in a previous blog posting.  Class will also begin tomorrow with a brief quiz based upon the assigned readings, which include “The New Religion of Risk Management”, by Peter Bernstein and “Normal and standard normal distribution”, by yours truly.

Going forward, I will typically not post reminders like this concerning Finance 4335 assignment deadlines; however, you’ll be “good to go” in Finance 4335 if you faithfully follow the guidelines listed in my “How to know whether you are on track with Finance 4366 assignments” posting.