Futures and Options

Welcome to Futures and Options (Fin 491). This course is better described as Derivatives and Financially Engineered Investment Products. This page provides you with access to the lecture notes for the course. If the topic is underlined, you may download the lecture to your computer. These notes are for your personal use, and may not be shared with those outside the course. In particular, they may not be shared with those outside the University.

Please note that the lecture slides are stored as .pdf files. You will need the Adobe Acrobat Reader to view the lecture slides. If you do not have the Acrobat Reader on your computer, go to my home page and click on Utilities for download instructions.

Lectures

Topic 1: Developing the Background
Topic 1: The Time Value of Money and the Valuation of Cash Flows
Topic 1b: Developing the Zero-Coupon Yield Curve
Excel spreadsheet for Topic 1b This workbook uses only the first sheet. Do not change any field except the column headed "Constant Maturity YTM."
Topic 1c: Forward Interest Rates
Excel spreadsheet for Topic 1c. This workbook uses only the first sheet. Do not change any field except those in column C. The data for that column should be copied from the zero-coupon spread sheet.

Topic 2: Futures Contracts
Topic 2a: Introduction to Futures
Topic 2b: Futures and Forward Prices
Topic 2c: Prices of Financial Futures
Topic 2c-1: Treasury Bond Conversion Factors
Topic 2c-2: Illustrating the invoice price of the delivered bond -- topic02c.xls
Topic 2d: Introduction to Hedging Through Financial Futures
Topic 2e: Examples of Hedges (updated 2/25/99)
Topic 2f: Hedging Value With Futures

Topic 3: Options
Topic 3a: Introduction to Options
Topic 3b: Pricing Options and the Value of Options
Topic 3c: Financial Options

Topic 4: Swaps
Topic 4a: Interest Rate Swaps
Swap01.xls (Excel spread sheet illustrating the cash flow pattern of a plain vanilla swap
pricing the swap_a.xls (Excel spread sheet illustrating the pricing of a plain vanilla swap
pricing the swap_00_a.xls (Excel spread sheet illustrating the valuation of a plain vanilla swap after interest rates change
Topic 4b: Managing Income and Value Risks with Interest Rate Swaps and other Derivative
Duration_swap.xls (Excel spread sheet illustrating the process to change the duration of a pool of assets with an interest rate swap
Topic 4c: Required reading on Credit Derivatives

Topic 5: Structured Securities
Topic 5a: Introduction to Structured Securities
Topic 5a.1: Required reading on structured securities. Your password is required.
Topic 5b: Slicing the Cash Flow of Structured Securities