Binomial model

5 Novembro 2018, 11:30 • João Guerra

The one-period binomial model. 

The risk neutral measure. The replicating portfolio. 

Numerical Example. 

The two-period binomial model. Numerical example. 

The n-period binomial model. 

The replicating portfolio. 

The recombining binomial model and the computational effort. 

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Bounds on option prices, put-call parity and one period binomial model

29 Outubro 2018, 11:30 • João Guerra

Lower bounds and upper bounds on call and put option prices. 

Put-call parity relationship. 

One period-binomial model. 

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Options and forward contracts

25 Outubro 2018, 11:30 • João Guerra

Intrinsic value and time value of an option. 

Factors that affect option prices: underlying share price, strike, time to expiry, volatility, interest rate and dividend income. 

Forward contracts: definition, pricing formula and proof of the pricing formula. 

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Wilkie model. Options and Financial derivatives

22 Outubro 2018, 11:30 • João Guerra

The Basic equations of the Wilkie model and its interpretation.

Introduction to options. 

Options: call options, put options. Definitions and examples. 

Types of trading: speculative, Arbitrage and hedging. 

The no-arbitrage assumption and the law of one-price. 

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The Wilkie model.

18 Outubro 2018, 11:30 • João Guerra

Longitudinal and cross sectional properties of time series. 

Auto-regressive models.

The Wilkie model basic equations.

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