ERM-617-19: Options, Futures and other Derivatives - Ch. 17, 19, 29

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Reading Source: Textbook - Options, Futures and other Derivatives

Topics Covered in this Reading:

  • Futures Options
    • Nature of futures options
    • Reasons for the popularity of futures options
    • European spot and futures options
    • Put-Call parity
    • Bounds for futures options
    • Valuation of futures options using binomial trees
    • Drift of a futures prices in a risk-neutral world
    • Black’s model for valuing futures options
    • American futures options vs. American spot options
    • Futures-style options
  • Volatility Smiles
    • Why the volatility smile is the same for calls and puts
    • Foreign currency options
    • Equity options
    • Alternative ways of characterizing the volatility smile
    • The volatility term structure and volatility surfaces
    • Greek letters
    • The role of the model
    • When a single large jump is anticipated
  • Convexity, timing, and quanto adjustments
    • Convexity adjustments
    • Timing adjustments
    • Quantos