# | Date | Topics (Reading: next columns) | 6th, 7th ed. | 8th ed. | Homework | Hull 6th, 7th ed | Hull 8th ed |
---|---|---|---|---|---|---|---|

1 | W 9/5 | Introduction | - | - | - | - | - |

2 | F 9/7 | Interest rates | - | - | - | - | - |

3 | M 9/10 | The exponential function | - | - | - | - | - |

4 | W 9/12 | Returns | - | - | - | - | - |

5 | F 9/14 | Data analysis I | - | - | HW 1 (due 9/19)(G), HW 2 (due 9/21)(AD) | - | - |

5 | M 9/17 | Calls | Hull Ch 1 | Hull Ch 1 | - | - | - |

6 | W 9/19 | Investing, speculating | Hull 1.8 | (ditto) | HW 3 (due 9/26)(G) | 1.9, 1.10 | (ditto) |

7 | F 9/21 | Puts, calls | Hull 1.5 | - | - | - | - |

8 | M 9/24 | (con't) | - | - | HW 4 (due 9/28)(G) | 1.4, 1.5, 1.7, 1.15, 1.16 | (ditto) |

9 | W 9/26 | Simple example of no arbitrage (two banks with different interest rates) | - | - | - | - | - |

- | - | Hedging with puts | Sec. 1.7 | (ditto) | - | - | - |

10 | F 9/28 | Pricing a forword | sec 5.4; read 5.1--5.3. | (ditto) | - | - | - |

- | - | Bachlier diagrams | 8.1, 8.2 Suggested reading: all of this chapter | 9.1, 9.2 | - | - | - |

11 | M 10/1 | Review for exam | (Practice problems and answers on ella) | - | - | - | - |

12 | W 10/3 | Spreads (bull, bear, butterfly) | 10.2, 10.3 8th: 11.2, 11.3 | 11.3, 11.4 | - | - | - |

13 | F 10/5 | Exam 1 (on material through 9/24) |
- | - | - | - | - |

14 | W 10/10 | Put-call parity: Proof using portfolios | 9.4 | 10.4 | - | - | - |

- | - | Proof using diagrams | - | - | - | - | - |

15 | F 10/12 | Binomial trees (an example) | 11.1 | 12.1 | HW 5 (due 10/17)(G) | 1.27, 1.28, 5.3, 8.1, 8.2, 8.13, 8.15 | 1.27, 1.28, 5.3, 9.1, 9.2, 9.13, 9.15 |

16 | M 10/15 | Binomial trees (general case) | 11.1 | 12.1 | HW 6 (due 10/19)(G). Write out all the steps, as in the example at the beginning of this section. | 11.1, 11.4 | 12.1, 12.4. |

17 | Weds 10/17 | Mountain day! | - | - | - | - | - |

18 | F 10/19 | Preview of Homework 7. Also probabilities, expected value. | - | - | HW 5, 6 are now due 10/22. HW 7 is due 10/24. | - | - |

19 | M 10/22 | Two-step trees | 11.3 | 12.3 | HW 8 (due 10/26) | 11.14, 11.17 (see ella announcement) | 12.14, 12.17 (ditto) |

20 | W 10/24 | Risk-neutral probabilities | 11.2 | 12.2 | - | - | - |

21 | F 10/26 | Currency forwards | 5.10 | 5.10 | HW 9 (handout, also on ella). (due 11/2) | - | - |

- | - | - | - | - | HW 10 (extra credit, counts for data analysis HWs; see below; due 11/9)) | - | - |

- | - | Two step trees (general case) | 11.3 | 12.3 | - | - | - |

22 | M 10/29 | Storm--no class | - | - | - | - | - |

23 | W 10/31 | Random walks | - | - | - | - | - |

- | - | Quiz 1 (on the method for pricing calls) |
- | - | - | - | - |

24 | F 11/2 | From random walks to geometric Brownian motion (see applets below) | 12.1-3 | 13.1-3 | - | - | - |

25 | M 11/5 | (con't) Practice test posted. | - | - | - | - | - |

26 | W 11/7 | Ito's lemma | 12.5 | 13.6 | - | - | - |

27 | F 11/9 | Exam 2 (on material through 10/26) |
- | - | - | - | - |

28 | M 11/12 | Black-Scholes PDE | 13.5, 13.6 | 14.5, 14.6 | HW 11 (due F 11/16) | 12.1, 12.2, 12.8, 12.9 | 13.1, 13.2, 13.8, 13.9 |

29 | W 11/14 | Geometry of the Black-Scholes PDE | - | - | - | - | |

30 | F 11/16 | Black-scholes formulas | 13.8 | 14.8 | HW 12 (due M 11/26). (do the first two problems in two ways: (1) by evaluating the formulas, and (2) check your answers using an applet--see below) | 13.13, 13.14 , 13.18. | 14.13, 14.14, 14.18 |

31 | M 11/19 | Movie: Trillion dollar bet | - | - | - | - | - |

32 | M 11/26 | Forwards (con't) | 5.7 | 5.7 | HW 13 (due 11/30) | 5.9 | 5.9 |

33 | W 11/28 | South Hadley stock market | - | - | - | - | - |

34 | F 11/30 | Using trees to price options | 11.7 | 12.7 | - | - | - |

35 | M 12/3 | Do real stocks follow the abstract model? | - | - | HW 14 (Due 12/7) | - | - |

36 | W 12/5 | Implied volatility | 13.11 | 14.11 | - | - | - |

37 | F 12/7 | Volatility smiles | 18.3 | 19.3 | HW 15 (due end of exam period0) | - | - |

- | - | Marte Carlo methods | 12.3; also 6th ed 17.6. 7th 19.6 | 13.3; 20.6 | HW 16 (extra credit; due end of exam period) | - | - |

38 | M 12/10 | - | - | - | - | - | - |

- | Th 12/13 | All homework due by 5pm |
- | - | - | - | - |

HW 12: One applet that looks good can be found at www.math.columbia.edu/~smirnov/options13.html. Also there's the program on the disc that comes with the book.

The statistical applets can be found at www.math.uah.edu/stat/applets/