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  • 20-08-2014 3:17pm
    #1
    Eire-Dearg
    Registered Users Posts: 8,900 ✭✭✭


    Anyone have slides and tutorials from this module? Aka Empirical Finance

    Lecturer won't send them over and I have no material on them for a repeat next week.


Comments

  • #2
    YFlyer
    Registered Users Posts: 9,717 ✭✭✭YFlyer


    Lecturer is been a knob.

    Did you try your classmates?


  • #3
    Eire-Dearg
    Registered Users Posts: 8,900 ✭✭✭Eire-Dearg


    YFlyer wrote: »
    Lecturer is been a knob.

    Did you try your classmates?

    Posted in our group fb page, no luck as of yet.


  • #4
    YFlyer
    Registered Users Posts: 9,717 ✭✭✭YFlyer


    Guess for now, while you're waiting, is to seek solutions to examination questions using text books and the internet. best of luck.


  • #5
    Eire-Dearg
    Registered Users Posts: 8,900 ✭✭✭Eire-Dearg


    Anyone know how to calculate European calls and American puts?

    I can't follow any of the examples online.


  • #6
    Harpy
    Registered Users Posts: 1,887 ✭✭✭Harpy


    hey i did that module, what notes are you missing i can try root them out and scan and send them to you..


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  • #7
    Eire-Dearg
    Registered Users Posts: 8,900 ✭✭✭Eire-Dearg


    Harpy wrote: »
    hey i did that module, what notes are you missing i can try root them out and scan and send them to you..
    I got them lad, thanks for the offer though!

    But if you can help with my question there that'd be great! :D


  • #8
    Harpy
    Registered Users Posts: 1,887 ✭✭✭Harpy


    Is there any particular place that your stumped with or is it your just not sure of the whole thing?


  • #9
    Eire-Dearg
    Registered Users Posts: 8,900 ✭✭✭Eire-Dearg


    The whole thing really, I can't find anything good online or in the slides that explains it. Nearly every place has a different method with different terms and inputs.

    The questions I'm looking at are - stock currently trading at $60, over next three two-month periods expected to go up by 10% or down by 10%. Risk free rate is 6%.

    - find three month European call option if exercise price is $58
    - find American put option if price is $64


  • #10
    Harpy
    Registered Users Posts: 1,887 ✭✭✭Harpy


    Eire-Dearg wrote: »
    The whole thing really, I can't find anything good online or in the slides that explains it. Nearly every place has a different method with different terms and inputs.

    The questions I'm looking at are - stock currently trading at $60, over next three two-month periods expected to go up by 10% or down by 10%. Risk free rate is 6%.

    - find three month European call option if exercise price is $58
    - find American put option if price is $64

    ok for the european.
    (1) the first step is to calculate the ups and downs so cause it'll go up by 10% or down by 10% you calculate the ups by multiplying by 1.1 and downs by .9 .. so itd be 60 * 1.1 for the first up and 60*.9 for down and then for the second up it'd be 72 * 1.1 and for the down 72*.9 and so on.

    (2) next step is to calculate the probabilites so to calculate the probability of going up its p= (r-d)/(u-d) where r = the risk free rate its 6% per year so so for a two month period it'd be 1%...and U is 1.1 and d in .9.....so probability would b (1.01-.9)/(1.1-.9)
    and to get the probability of going down its (1-P) (P= the probability of it going up)

    (3)
    next you calculate the pay offs... which is S-X which so you'll have four final prices at the end of the tree.. and you take that price (s) from the exercise price ($58)

    and then to calculate the option value it's
    (Probability * Payoff) + Prob * Payoff) /(1+r)to the power of t

    so if its the top pay off ( its up,up,up) so itll be (Prob) to the power of 3 * payoff .. the reason its to the power of three there is because in the 3 time periods to get that pay off ,the price is going up....

    im not sure if that explains it very well at all its hard to explain without drawing out the trees.. maybe have a go at that and see where you get stuck..


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