Derivatives Markets

Get the grades you deserve thru our step by step guide on your MITx MicroMasters Finance - Derivatives Markets: Advanced Modeling and Strategies. MITx 15.435x
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Week 6: Volatility and Other Options Pricing Models

Consider a futures. Its current price is $70.00 and its volatility is 16.44% per annum. Suppose the risk-free interest rate is 6.26% per annum (continuous compounding). Use the Black's model to calculate the value of a five-month European put on the futures with a strike price of $65.00.
Week 5: Black-Scholes-Merton and the Greeks
Using the program (BinomialTree.xls), calculate the value today of a European put option assuming the following set of inputs:
μ=.08,σ=.25,r=1%,δ=0%,S_0=$375,K=$300,T=.5," and " n=10
Week 4: Options Strategies and Pricing Basics

The current price of a non-dividend paying stock is $30. Use a two-step tree to value a European put option on the stock with a strike price of $32 that expires in 6 months with the up node at each step equal to 1.1 times the price at the previous node, and the down node equal to 0.9 times the price at the previous node. Each step is 3 months; the risk free rate is 8% per annum on a continuous basis.

(a) What is the price of the put option?
Week 3: Duration and Convexity-based Strategies for Risk Management

Assume that the Treasury yield curve is flat at 3% on an annual basis (i.e., an investment of $100 receives a $3 interest payment at the end of the year).
Utilize the duration and convexity calculator and answer the following (a) - (d).
(a) Calculate the modified duration and the convexity of a 1-year zero coupon Treasury bond.
Week 2: Futures and Swaps

The exchange rate of one Swiss franc is $1.36. The price of a 6-month U.S. zero coupon bond is $0.90, and the price of a 1-year U.S. zero coupon bond is $0.88. Forward contracts are available on the Swiss franc. The forward price is $1.31 for a 6-month forward and $1.35 for a 1-year forward.
What should be the fixed rate for a 1-year semiannual interest rate swap in Switzerland? Write your answer in unit of percentage points.
Week 1: Forward Contracts

A stock index currently stands at $350.00. The risk-free interest rate is 4.57% per annum (with continuous compounding) and the dividend yield on the index is 3.14% per annum.
What should the forward price for a 4.00-month contract on the index be?
Week 0

Derivative securities, and the analytical methods that have been developed to understand and deploy them, are powerful tools for managing and pricing risk. As part of the MicroMasters® Program in Finance, students in this course will develop a sophisticated and durable understanding of derivative modeling, valuation and hedging methods, a basic familiarity with major markets, instruments and strategies, and insights into current market developments.
The skills acquired are relevant to all financial market practitioners, but will be most useful for those planning a career in sales and trading, portfolio management, commercial banking, investment banking, insurance, hedge funds, financial advising, or in a public sector financial institution or central bank.

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