Category: Announcements

A Finance 4366 student asked me earlier today for midterm 1 exam study tips.  I recommend working the Sample Midterm 1 Exam, reviewing problem set 3–5 solutions, all of which will be available at http://derivatives.garven.com/category/problem-set-solutions/ by Thursday, February 15 for our midterm 1 review session.  It also wouldn’t hurt to review the assigned readings and lecture notes on which the exam is based:

Assigned Readings:

January 30	1. Hull, Chapters 1 (“(Introduction”), 2 (“Mechanics of Futures Markets”), 10 (“Mechanics of Options Markets”) 2. Futures and Options Markets (Optional), by Gregory J. Millman
February 1	1. Hull, Chapter 5 (“Determination of Forward and Futures Prices”) 2. A Simple Model of a Financial Market, by James R. Garven
February 8	1. Hull, Chapter 11 (“Properties of Stock Options”) 2. Properties of Stock Options Chapter synopsis, by James R. Garven
February 13	Hull, Chapter 12 (“Trading Strategies Involving Options”)

Lecture Notes:

• Introduction to Options, Futures, and Other Derivatives (January 30)
• Replicating Portfolio approaches to Pricing Forwards and Futures, and Pricing Options (February 1-6)
• Properties of Stock Options (February 8)
• Trading Strategies Involving Options (February 13)

Here is a “heads-up” about the Finance 4366 grade book on Canvas.  There, you will find grade averages that reflect 1) attendance/participation grades for the first four class meetings, 2) two quiz grades and a student survey completion grade which counts as a quiz grade, and 3) problem set 1.  Thus, your current (Monday, January 29) course numeric grade in Finance 4366 is based on the following equation:

(1) Current Course Numeric Grade = (.10(Attendance and Participation) +.10(Quizzes) +.20(Problem Sets))/.4

Note that equation (1) is a special case of the final course numeric grade equation (equation (2) below) which also appears in the “Grade Determination” section of the course syllabus:

(2) 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)}

My goal going forward is for the Finance 4366 grade book to dynamically incorporate new grade information on a timely basis for each student, consistent with the final course numeric grade equation.  For example, after midterm 1 grading is complete, equation (3) will be used to determine your numeric course grade:

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

After midterm 2 grades are recorded, equation (4) will be used to determine your numeric course grade then:

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

After the spring semester and the final exam period are over, all Finance 4366-related grades will have been collected, and I will use equation 2 above to calculate your final course numeric grade.  At that time, your final course letter grade will be based on the following schedule (which appears in the “Grade Determination” section of the course syllabus):

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 sets and quizzes are due before the start of class on the day on which they are assigned. Problem sets must be in PDF format and uploaded to Canvas (instructions for doing so are available in the document titled “How to scan assignments to PDF and post to Canvas”).  If the assignment you turn in has multiple pages, please consolidate your assignment into a single PDF file.

This week, we will cover a two-part statistics tutorial based on the Statistics Tutorial, Part 1 and Part 2 lecture notes (items 3 and 4 on the Lecture Notes page).

Due tomorrow (1/23):

• Readings listed for January 23 on the Readings page,
• Quiz 2 (Based on these readings), available from https://baylor.instructure.com/courses/197736/quizzes/374530.
• Problem Set 1 (Based on the Math tutorial last Thursday, available as item 2 on the Problem Sets page); turn in at https://baylor.instructure.com/courses/197736/assignments/1913981.

The required textbook for the Options, Futures, and Other Derivatives (Finance 4366) course at Baylor University (coincidentally) shares the same title as the course.

Although I list the 11th (US) edition as “required” for Finance 4366 in the course syllabus, earlier editions of this book, e.g., the 8th, 9th, and 10th (US and international) editions, will also suffice since the chapters we cover in Finance 4366 are virtually identical across the 8th through 11th editions. When you make your purchase, make sure that the book author (John C. Hull) and title (Options, Futures, and Other Derivatives) are the same, that the edition of the book is no earlier than the 8th edition, and that you are buying the textbook and not the solutions manual or instructor’s manual.

Finally, don’t worry about whether the book you buy or rent includes the “Derivagem” software. Derivagem is an Excel-based Options Calculator and Applications Builder you can download Professor Hull’s website at https://www-2.rotman.utoronto.ca/~hull/software/DG400a.zip.