Philip H. Dybvig

Washington University in Saint Louis

**AMAZING Guest Speaker** Weibai Zhang is a Senior Financial Analyst in the Portfolio Management Department of Citimortgage, a member of Citigroup. His Financial Analyst in the Portfolio Management Department of Citimortgage, a member of Citigroup. For more information, see his bio.

**XTREME Review** trendy and to the point

**SYMPHONY of In-Class Exercises** academic analog of a symphony of desserts

**COURSE Evaluations** Okay, these are not exciting or novel, but they are very useful to me and your feedback will benefit future generations of students.

**QIGONG and Taijiquan** optional, as always

**Final Exam March 2** The final exam will be during the usual class time in the week following our final class. The format will be similar to the practice exam:

Practice Exam ... Answers ... Formula Sheet

This Year's Final ... Answers ... Formula Sheet

A formula sheet will be provided at the end of the exam.

I have decided not to include any questions on fudge factors on the final; I prefer for you to spend your study time getting a thorough knowledge of the other techniques instead of getting spread too thin.

If you would like a review of option pricing, I invite you to have a look at slides from my options and futures course, especially Lectures 2 and 3.

Many the problems Kangzhen and I are using were originally written by Yufeng Han and Paskalis Glabadanidis, now PhD alums, who were previous TAs in this course.

Practice for Lecture 2: Problems - Solutions

Practice for Lecture 3: Problem - Solution

Practice for Lecture 4: Problems - Solutions

Practice for Lecture 5: Problems - Solutions

Practice for Lecture 6: Problems - Solutions

There are more problems and solutions (from Tuckman's teacher's manual) on BlackBoard.

Approximate correspondence to the optional text (Tuckman).

Lecture | Chapters |
---|---|

1 | 15 through 21* |

2 | 1 and 2 |

3 | 3 and 4 |

4 | 5 and 6 |

5 | 9 and 11 |

Tuckman introduces a lot of the securities, with analysis, in Part IV (Chapters 15 through 21). Part IV also includes discussions of particular cases and examples illustrating the needs and strategies of the various players. We don't have time to go into that level of detail in a half-semester course, but there is a lot of valuable information there if you have time to read it. This can also serve to supplement Lecture 1 if you found that material hard to follow. Also, I recommend reading the whole book if you have a serious professional interest in this area.

I recommend that you print a set of slides before class for taking notes and solving in-class exercises. One set of slides corresponds to one week's lecture.

The condensed versions below shrink each slide to the corner to leave more room for taking notes. The regular pdf versions are the same as the slides used in class. The 4-up versions save paper by having four slides per page.

This is the second offering of the class. Hopefully, most of the gremlins were fixed the first time, but there is some new material. Please notify me promptly if you spot any problems.

Lecture 1: Overview

...pdf

...pdf condensed

...pdf 4-up

Lecture 2: Basic Terminology and Concepts

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...pdf condensed

...pdf 4-up

Lecture 3: Yield Curves

...pdf

...pdf condensed

...pdf 4-up

Lecture 4: Interest Rate Risk Exposure: Traditional Approaches

...pdf

...pdf condensed

...pdf 4-up

Lecture 5: Tools from Option Pricing

...pdf

...pdf condensed

...pdf 4-up

Lecture 6: Xtreme Review

...pdf

...pdf condensed

...pdf 4-up