The mathematical theory associated with asset price dynamics; binomial pricing models; Black-Scholes analysis; hedging; volatility smile; implied volatility trees; implied binomial trees. Prerequisites: MATH 172 or equivalent; MATH 308 or equivalent; basic probability.
Understand basic types of options and the use of spreads to achieve a given payoff; know about the mathematical theory associated with asset price dynamics, understand volatility; be able to use binomial pricing models and Black-Scholes analysis; understand hedging process.
Lecture notes and exercise sheets will be posted on the class homepage. Optionally, one can study using the following textbooks:
Dr Gregory Berkolaiko, Blocker 625c.
TR 9:35-10:50, BLOC 128.
Mondays 3-4, Fridays 11-noon and by appointment.
Optional midterm exam: Thursday, Oct 19 (regular class time and place). Final exam: Thursday, December 7, 12:30-2:30 in our regular classroom. Exam submissions will be done through Gradescope.
Around 4-5 quizzes, based on the homework, taking place on the homework due date. They will not be announced in advance.
There may also be pop quizzes, whose grades will be added to the pool of Quiz/HW grades.
Homework is posted on the course homepage, approximately bi-weekly. At least one homework will involve working with stock market data (Matlab recommended). All homework submissions will be done through Gradescope.
Homework grade may be adjusted downward if the subsequent quiz performance is 50% lower than the score on the corresponding homework problem. Any disputes will be adjudicated by the Aggie Honor Council.
Exams, homework and quizzes will be in "show full work" format. Homework must be submitted through Gradescope. Rules:
The following grade breakdown will be used:
|A||85% and more||Midterm||(optional: 30%)|
|B||75% and more||Homeworks and Quizzes||20%|
|C||65% and more||Final exam||80% (if the midterm is taken: 50%)|
|D||55% and more|
|F||less than 55%|
Make-ups for missed quizzes: can be done at any regularly scheduled office hours. No documentation is needed unless the instructor feels this generous policy is being abused. Midterm is optional and no make-up will be given; the final serves as the automatic make-up for the midterm missed for any reasons. Missed final will result in an F (unexcused absence) or Incomplete (excused absense). Homework extensions will be granted for a university approved absence that could not be foreseen; please submit your excuse by email (see Rule 7).
Sometimes the instructor or the grader might make a mistake grading your work. If you feel that this has happened, you have one week since the graded work was handed back to you to talk to the instructor. If a mistake is confirmed, the grade will be changed. No complaints after that deadline will be considered.
Copying work done by others, either in-class or out of class, is an act of scholastic dishonesty and will be prosecuted to the full extent allowed by University policy. Collaboration on assignments, either in-class or out-of-class, is forbidden unless permission to do so is granted by your instructor. For more information on university policies regarding scholastic dishonesty, see University Student Rules.
Whenever doing assignments it is always a good practice to cite the sources of formulas, ideas etc. In this class, there are three types of sources.
"An Aggie does not lie, cheat, or steal or tolerate those who do." See: http://aggiehonor.tamu.edu/.
The Americans with Disabilities Act (ADA) is a federal anti-discrimination statute that provides comprehensive civil rights protection for persons with disabilities. Among other things, this legislation requires that all students with disabilities be guaranteed a learning environment that provides for reasonable accommodation of their disabilities. If you believe you have a disability requiring an accommodation, please contact Disability Services, currently located in the Disability Services building at the Student Services at White Creek complex on west campus or call 979-845-1637. For additional information, visit disability.tamu.edu.
All printed materials disseminated in class or on the web are protected by Copyright laws. One photocopy (or download from the web) is allowed for personal use. Multiple copies or sale of any of these materials is strictly prohibited.
Texas A&M University is committed to fostering a learning environment that is safe and productive for all. University policies and federal and state laws prohibit gender-based discrimination and sexual harassment, including sexual assault, sexual exploitation, domestic violence, dating violence, and stalking.
With the exception of some medical and mental health providers,
all university employees (including full and part-time faculty,
staff, paid graduate assistants, student workers, etc.) are
Mandatory Reporters and must report to the Title IX Office if the
employee experiences, observes, or becomes aware of an incident
that meets the following conditions (see University Rule
08.01.01.M1): (*) The incident is reasonably believed to be
discrimination or harassment. (*) The incident is alleged to have been committed by or against a person who, at the time of the incident, was (1) a student enrolled at the University or (2) an employee of the University.
Mandatory Reporters must file a report regardless of how the information comes to their attention – including but not limited to face-to-face conversations, a written class assignment or paper, class discussion, email, text, or social media post. Although Mandatory Reporters must file a report, in most instances, you will be able to control how the report is handled, including whether or not to pursue a formal investigation. The University’s goal is to make sure you are aware of the range of options available to you and to ensure access to the resources you need.
Students wishing to discuss concerns in a confidential setting are encouraged to make an appointment with Counseling and Psychological Services (CAPS).
Students can learn more about filing a report, accessing supportive resources, and navigating the Title IX investigation and resolution process on the University’s Title IX webpage.
Texas A&M University recognizes that mental health and wellness are critical factors that influence a student’s academic success and overall wellbeing. Students are encouraged to engage in proper self-care by utilizing the resources and services available from Counseling and Psychological Services (CAPS). Students who need someone to talk to can call the TAMU Helpline (979-845-2700) from 4:00 p.m. to 8:00 a.m. weekdays and 24 hours on weekends. 24-hour emergency help is also available through the National Suicide Prevention Hotline (800-273-8255) or at suicidepreventionlifeline.org.