Problem Set 2 helpful hints

Problem Set 2 is available from the course website at http://fin4366.garven.com/spring2023/ps2.pdf; its due date is Tuesday, January 31.

Problem Set 2 consists of two problems. The first problem requires calculating expected value, standard deviation, and correlation, and using this information as inputs into determining expected returns and standard deviations for 2-asset portfolios. The second problem involves using the standard normal probability distribution to calculate the probabilities of earning various levels of return by investing in risky securities and portfolios; see pp. 15-21 of the http://fin4366.garven.com/spring2023/lecture4.pdf lecture note for coverage of that topic.

Assignments for Thursday, January 19 in Finance 4366

As indicated on the http://fin4366.garven.com/readings page of the course website, the readings assigned for the second day of class (Thursday, January 19) include

1. Calculating (Math) Derivatives, by James R. Garven
2. Optimization (chapter 2 from Managerial Economics, by W. Bruce Allen, Neil Doherty, Keith Weigelt, and Edwin Mansfield, 6th edition (2005))
3. How long does it take to double (triple/quadruple/n-tuple) your money?, by James R. Garven

Pages 74-76 of the “Optimization” reading  (entitled “Lagrangian Multipliers”)  may be skipped without loss of continuity. The primary purpose of this reading is to re-acquaint students with basic calculus and how to use calculus to solve (unconstrained) optimization (i.e., maximization and minimization) problems. Since none of our work in Finance 4366 requires solving constrained optimization problems, there’s no need (in this course, anyway) for Lagrangian multipliers.

Besides reading these three articles in preparation for the second day of class, Finance 4366 students are also required to complete Quiz 1 on Canvas,  fill in the Student information survey, and sign up for a free WSJ student membership at https://wsj.com/ActivateBaylor.

Course Requirement: Email subscription to the Options, Futures and Other Derivatives Course Blog (instructions given here)

A course blog has been established for Finance 4366 at the address http://derivatives.garven.com; it is also linked from the “Course Blog” button located on the course website. This resource provides a convenient means for Dr. Garven to distribute important announcements outside of class. Topics covered on the course blog typically include things like changes in the course schedule, clarifications, and hints concerning problem sets, information about upcoming exams, announcements concerning extra credit opportunities, and short blurbs showing how current events relate to many of the topics covered in Finance 4366.

All students enrolled in Finance 4366 are required to subscribe to the course blog via email.

Email Subscription Instructions:

In order to subscribe to the course blog via email, go to derivatives.garven.com and enter your email address in the form provided on the right-hand side of that webpage:

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After clicking “Subscribe”, the following information will appear on your screen:

derivatives.garven.com success

Next, check for an email from “Options, Futures, and Other Derivatives <donotreply@wordpress.com>”:

Please confirm

Next, simply click the “Confirm Follow” button. This will cause you to receive the following email:

Confirmed

From that point forward, whenever I post to the course blog, you will immediately receive a nicely formatted version of the blog posting via email.