935-6329
Washington University Olin School
Option pricing theory is one of great success stories of the application of scientific methods to business. Option pricing tools have applications across finance in such diverse areas as capital budgeting, investments, speculation, currency hedging, and (of course) pricing and hedging marketed options and futures. This course is a follow-on to FIN 524, Options and Futures, with a greater emphasis on applications and extensions. Students will have great flexibility in developing a final project matched to the student's interests.
Prerequisites Introductory finance and Finance 524 (Options and Futures). The quantitative level of the course is entirely up to the student and will vary by choice of project.
Organization of the course This is a relatively unstructured hands-on course. Class time will be spent discussing ideas and development of student projects, impromptu lectures on related topics, and guest speakers.
Course Requirements Grades in the course will be based mainly on the presentation and short handout of the final project. Class participation may change a grade near a cutoff.
Project Class time will be used to allow students to formulate, develop, and present their final projects. The topic for the final project is open-ended and the only firm requirement is that it has to have a significant connection to finance. Many students will find projects that apply the option pricing tools in class. For example, students have used option pricing to analyze the option to buy a car at the end of a lease, the option to buy another airplane that is commonly bundled with the purchase of a passenger jet, or the option to terminate a product after the pre-test or test market. Other projects follow students interests in areas of finance they may not get to see elsewhere in their coursework. For example, one student used Real Estate Investment Trust (REIT) prices to build a real estate price index, and other students have analyzed the investment environment in countries they were interested in. Classes will include discussions of projects and impromptu lectures on topics that are useful background for projects. Students may work on projects individually or form groups.
Course materials There are no new course materials for this course. Your textbooks and materials from other courses will probably be useful for reference as you work on your projects. In particular, most projects will apply option pricing theory and the FIN524 Materials are probably useful for review.
Transparencies none
Textbooks none
Teaching Assistance Dong Chuhl Oh will assist in offering the course. He is a second-year doctoral student in finance and he had a lot of training in finance before coming here. He has good interpersonal skills, and I believe you will discover that we are fortunate to have his assistance. His office is Simon 386 (enter through 286 and go upstairs). Dong's phone number is 935-4884, and his e-mail addresses is:
Dong is around the school a lot, and he is usually easy to find. He will also plan to be in his office 2:00--4:00pm on Fridays for your questions. Of course, you can also direct your questions to me; I recommend e-mail at
as an effective way of tracking me down quickly. (Please do not put these e-mail addresses on any web site or mailing list. They are given in graphical form in a feeble attempt to slow down the spammers.)
About you In addition to enrolling through the proper authorities, please send me an e-mail with the following information (if you did not already do so for FIN524):
About me I was previously a tenured full professor at Yale, and I came to Wash U in 1988 in the hope of building a top finance group, which we have done. More information on me is in the chatty blurb at http://dybfin.wustl.edu/misc/about.html or in my vitae at http://dybfin.wustl.edu/misc/vitae.html. All of my Web pages can be accessed through my home page.
Feedback Feedback is especially important to me. Written feedback by e-mail is especially useful.
Integrity Students are expected to conform to the Olin School's Code of Conduct.
Summary I invite you to join me in exploring the exciting world of options and futures!