MATH 425, fall 2018

Course information

• Instructor: Dr G.Berkolaiko, office: Blocker 625c, email: berko AT math.tamu.edu
• Lectures: TR 11:10-12:25, BLOC 117
• Course description
• Detailed course content.
• Homework and exam grades on eCampus.

Extras

• Get Matlab (free or cheap for Texas A&M Students) or Octave (open-source analogue of Matlab)
• Some websites with relevant quotes:
  • SPX quote on Chicago Board Options Exchange (enter SPX and press Submit)
  • SPY quote on Yahoo Finance
  • E-mini S&P 500 Futures on CME
• Other resources:
  • Options glossary.
  • Investopedia, for example Futures Fundamentals.
  • An illustration of CLT: sampling distributions.
• Matlab demonstrations:
  • m_TreeExamples.m: examples of binomial trees
  • m_NVDA_Prices.m are close-to-close price movements log-normal? Uses NVDA20152018.mat and qqplot.m that substitutes the function from Matlab Stats Toolbox.
  • Comparison of different choices of the parameters \(u\) and \(d\) m_Tree_Choosing_ud.m. Also compares with Black-Scholes-Merton formula BSMcall.m
  • m_TreeLimit_Lognormal.m: comparison between tree distribution and lognormal
  • m_AssetPriceModelWiener.m: numerical experiments with continuous asset price model
  • m_BSM_Hedging.m hedging an options portfolio using Black-Scholes formula (uses functions SimulatePricePath.m, BSMcall.m).
  • BSMiVolCall.m function computing implied volatility of an option.
• Past exams.
• Lecture Notes:
  • 2018-09-04/06.
  • 2018-09-11/13/18/20.
  • For lectures 2018-09-25/27: 1-level trees, additional examples.
  • Binomial tree theory and examples.
  • Asset Price Model and Tree Parameters.
  • Distribution of function of a random variable part I and part II.
  • European Option Price as a Limit of Large Trees.
  • Ito formulae with examples.
  • Black-Scholes-Merton equation, the Greeks.

Homework

• Homework will be chosen from the Exercises list. I will be enlarging this document as we go along, press a reload button every time you access it.
• Solutions will be posted on eCampus

Exercises with stars next to them are compulsory for honors students.

1. HW1 Submit Tue, Sep 11: Exercises 3.2, 3.5, 3.6, 3.12, 3.17, 3.18, 4.1
2. HW2 Submit Tue, Sep 25: Exercises 1.2, 1.3, 1.15, 1.9, 1.11, 1.12, 1.17
3. HW3 Submit Tue, Oct 9: Exercises 2.1, 2.2, 2.3, 2.4, 2.10, 2.6, 2.7, 2.8.
4. HW4 Submit Tue, Nov 6: Exercises 2.12, 2.13, 4.2, 4.3.
5. HW5 Submit Tue, Nov 20: Exercises 4.6, 4.7, 4.8, 5.1, 5.4.
6. HW6 Submit Tue, Dec 4: Exercises 6.2, 6.6, 6.9, 6.11.
7. HW7 Submit Tue, Dec 4: Exercises 6.1 (Matlab mini-project).

This file was last modified on Wednesday, 10-Jan-2024 15:58:01 CST.