MA 343 Discrete Options Pricing Fall, 2018

Day Date Topic

Tu 28 Aug Economic Foundations
Binary Equity Market Model, Forward and Option Price,
Derived Asset
F 31 Aug Option Payoff Diagram, Portfolio Tree
Arbitrage Portfolio & No Arbitrage Condition
Tu 4 Sept Law of One Price, Replicating Portfolio & Option Pricing
Formula
F 7 Sept Arrow-Debreu State Prices
Tu 11 Sept NO CLASS TODAY
F 14 Sept Properties of State Prices
Tu 18 Sept Financial Engineering, Numeraires and Numeraire pricing
F 21 Sept EXAM # 1
Tu 25 Sept Binary Probability Model: Numeraire, Risk-Neutral & State
Prices
F 28 Sept Pricing Relationships & Forward Price and Arbitrage
Tu 2 Oct Forward Price and Arbitrage
F 5 Oct Foreign Exchange Model, European Call on Currency
Forward Exchange Rate & Interest Rate Parity
Tu 9 Oct NO CLASS TODAY – FALL MINI-BREAK
F 12 Oct Dynamic Interest Rate, Zero Coupon Bonds (ZCB) & Short
Rate Process
Tu 16 Oct EXAM #2
F 19 Oct Class Cancelled – Pres. Install. (Drop Put/Call Parity)
Tu 23 Oct American style options: intrinsic value and pricing
F 26 Oct Multi-period Binary Tree: Backward Recursion, Self-
financing Strategy
Tu 30 Oct Multi-period Binary Tree: European & American Option
Pricing
F 2 Nov Multi-period Binary Tree, Combinatorics
n-period state pricing and risk-neutral probabilities
Tu 6 Nov EXAM # 3
F 9 Nov Black-Scholes Formula , Share & Dollar Digitals
Money Market Numeraire
Tu 13 Nov Forward Induction & State pricing of ZCB
F 16 Nov Path (in)dependent Options: forward, collar, Barrier, look-
back, Asian, etc.
Tu 20 Nov ZCB Pricing using Short Rates
Tu 27 Nov Black-Derman-Toy Bond Pricing (part 1)
F 30 Nov EXAM # 4
Tu 4 Dec Black-Derman-Toy Bond Pricing (part 2)
Fri 7 Dec Last Class

Final Exam: Tuesday12/18 8:30 am