| # | Date | Topics | Core Reading | Background Reading | Homework |
|---|---|---|---|---|---|
| 1 | F 9/7 | Introduction | - | - | - |
| 2 | M 9/10 | Compound interest | Handout from Hahn | - | Problems 1, 4, 5, 6 on handout (due 9/17) (answers). |
| 3 | W 9/12 | Interest (continued) | - | - | - |
| 4 | F 9/14 | Present and future value | - | - | HW 2 (due 9/21; postponed to 9/24) |
| 5 | M 9/17 | Stocks and the stock market | - | WSJ Guide p. 34-81 (these topics will come up sooner or later) | HW 3 (first part: Get 10 years worth of data on a stock) |
| 6 | W 9/19 | random variables, expected value, sample mean, return on an investment | Wilmott 3.3 | - | HW 3 (con't) Compute the daily returns for the last ten days for your company. |
| 7 | F 9/21 | - | - | - | - |
| 8 | M 9/24 | demo HW 3 | - | - | HW 3 (due 9/28) |
| 9 | W 9/26 | Mountain day! | - | - | - |
| 10 | F 9/28 | basic probability theory | handout on probability and statistics | Hull Ch 1 | - |
| 11 | M 10/1 | coin tossing | - | Wilmott Ch 3 | - |
| 12 | W 10/3 | coin tossing as Brownian motion | handout on Brownian motion (to appear) | - | - |
| 13 | F 10/5 | Brownian motion (con't) | - | - | HW 4 (due 10/15) |
| 14 | W 10/10 | Forwards | Hull 3.2 | - | HW 5 (due 10/17) |
| 15 | F 10/12 | Futures | - | Hull Ch 2, WSJG p. 126-137 | - |
| 16 | M 10/15 | Currency forwards | Hull 3.8, Ross p. 69 | - | - |
| 17 | W 10/17 | Calls and puts | Hull 1.3, 1.5 | Hull Ch 6; Wilmott Ch 2; WSJG: 140-149 | - |
| 18 | F 10/19 | Bachelier (payoff) diagrams | Hull p. 9, Wilmott 2.4 | - | - |
| 19 | M 10/22 | review for test; also bull spread | Hull Ch 8 (don't need to know by name, but should be able to construct) | Wilmott 2.14f. | - |
| 20 | W 10/24 | - | - | - | - |
| 21 | F 10/26 | Test I | - | - | - |
| 22 | M 10/29 | put-call parity | Hull 7.4 | Wilmott 2.12 | Homework 6 |
| 23 | W 10/31 | binomial trees | Hull 9.1 | - | - |
| 24 | F 11/2 | (con't) | Hull 9.2, 9.3, 9.4 | - | HW 7: Hull p. 216 (answers in parentheses): 1 ($1.69), 4 ($1.16), 5 ($9.61), 6 ($1.92) |
| 25 | M 11/5 | Brownian motion and geometric Brownian motion | Handout, also Hull 10.1 to 10.5 | - | - |
| 26 | W 11/7 | - | - | - | - |
| 27 | F 11/9 | - | - | - | - |
| 28 | M 11/12 | Ito's lemma | Hull 10.6, Appendix 10A | - | HW 8 (due 11/19) |
| 29 | W 11/14 | Black-Scholes PDE | Hull 11.4, 11.5 | Wilmott Ch. 5 | - |
| 30 | F 11/16 | Solving the equation for GBM | Hull p. 230 | Wilmott Ch 4 | - |
| 31 | M 11/19 | Black-Scholes formulas | Hull 11.7 | - | HW 9: Hull 10.8, 11.4 (Ans: $2.37), 11.13 (Ans: $5.06). Check your answer to 11.13 using Maple or DerivaGem. (due 11/28) |
| 32 | M 11/26 | American vs European options | Hull 7.5, 7.6 | - | HW 10 (due 12/5) |
| 33 | W 11/28 | Estimating mu and sigma (handout to come) | Test II(self-scheduled) | - | - |
| 34 | F 11/30 | Video: Trillion-dollar bet | - | - | - |
| 35 | M 12/3 | - | - | - | HW 11 (due 12/10) |
| 36 | W 12/5 | Evaluating American puts with a tree | Hull 16.1 | - | HW 13 |
| - | - | Risk-neutral valuation | Hull 11.6 | Wilmott p. 164, WHD 5.6 | - |
| 37 | F 12/7 | Volatility smiles | Hull 17.3 (p. 438) | - | HW 12 (due 12/12) |
| - | - | Solutions to the BS PDE: European calls | WHD p. 46, Wilmott p. 107 | - | - |
| - | - | Solutions to the BS PDE: forwards | Hull p. 247 | - | - |
| 38 | M 12/10 | Pricing options by simulation | Hull 16.6 (p. 406) | Wilmott p. 924 | HW 14: pricing calls by simulation |
| - | - | Exotic options | Hull Ch. 18 | - | HW 15: pricing lookback calls |
| 39 | W 12/12 | Summary; defects in Black-Scholes | - | Wilmott Ch. 22 | - |