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• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Preface
• Symbols
• I Conceptual Foundation on Derivatives
• 1 An Introduction to Forwards and Options
• 1.1 Forwards
• 1.2 Options
• 1.2.1 Call Options
• 1.2.2 Put Options
• 1.3 Classification of Derivatives
• 1.4 Problems
• 2 Forwards and Futures
• 2.1 Alternative Ways to Buy a Stock
• 2.2 Prepaid Forwards
• 2.2.1 Nondividend-paying Stocks
• 2.2.2 Dividend-paying Stocks
• 2.3 Forwards
• 2.3.1 Forward Prices
• 2.3.2 Cash-and-Carry Arbitrage
• 2.3.3 Digression: Market Frictions
• 2.4 Futures
• 2.4.1 Differences between Futures and Forwards
• 2.4.2 Marking to Market
• 2.5 Problems
• 3 Option Strategies
• 3.1 Basic Insurance Strategies
• 3.1.1 Insuring a Long Position: Floors
• 3.1.2 Insuring a Short Position: Caps
• 3.1.3 Selling Insurance
• 3.1.4 A Simple but Useful Observation: Parallel Payoffs, Identical Profit
• 3.2 Put-call Parity
• 3.2.1 Synthetic Forwards
• 3.2.2 The Put-call Parity Equation
• 3.3 Spreads and Collars
• 3.3.1 Spreads
• 3.3.2 Collars
• 3.4 Volatility Speculation
• 3.4.1 Straddles
• 3.4.2 Strangles
• 3.4.3 Butterfly Spreads
• 3.5 Problems
• II Pricing and Hedging of Derivatives
• 4 Binomial Option Pricing Models
• 4.1 One-period Binomial Trees
• 4.1.1 Pricing by Replication
• 4.1.2 Risk-neutral Pricing
• 4.1.3 Constructing a Binomial Tree
• 4.2 Multi-period Binomial Trees
• 4.3 American Options
• 4.4 Options on Other Assets
• 4.4.1 Case Study 1: Currency Options
• 4.4.2 Case Study 2: Options on Futures
• 4.5 Epilogue: Pricing by Real Probabilities of Stock Price Movements
• 4.6 Problems
• 5 Mathematical Foundations of the Black-Scholes Framework
• 5.1 A Lognormal Model of Stock Prices
• 5.2 Lognormal-Based Probabilistic Quantities
• 5.3 Problems
• 6 The Black-Scholes Formula
• 6.1 Black-Scholes Formula for Stocks Paying Continuous Proportional Dividends
• 6.2 Applying the Black-Scholes Formula to Other Underlying Assets
• 6.2.1 Case study 1: Stocks paying non-random, discrete dividends
• 6.2.2 Case Study 2: Currency options
• 6.2.3 Case Study 3: Futures options
• 6.3 Option Greeks
• 6.3.1 Option Delta
• 6.3.2 Option Gamma
• 6.3.3 Option Greeks of a Portfolio
• 6.3.4 Option Elasticity
• 6.4 Problems
• 7 Option Greeks and Risk Management
• 7.1 Delta-hedging
• 7.2 Hedging Multiple Greeks
• 7.3 Delta-Gamma-Theta Approximation
• 7.4 Problems
• 8 Exotic Options
• 8.1 Gap Options
• 8.1.1 Introduction
• 8.1.2 All-or-Nothing Options
• 8.1.3 Pricing and Hedging Gap Options
• 8.2 Exchange Options
• 8.2.1 Introduction
• 8.2.2 Pricing Exchange Options
• 8.2.3 Pricing Maximum and Minimum Contingent Claims
• 8.3 Compound Options
• 8.4 Asian Options
• 8.4.1 Introduction
• 8.4.2 Pricing Asian Options
• 8.5 Lookback Options
• 8.6 Shout Options
• 8.7 Barrier Options
• 8.8 Other Exotic Options
• 8.8.1 Chooser Options
• 8.8.2 Forward Start Options
• 8.9 Problems
• III Epilogue
• 9 General Properties of Option Prices
• 9.1 Put-Call Parity and Duality
• 9.1.1 Generalized Parity
• 9.1.2 Currency Put-call Duality
• 9.2 Upper and Lower Bounds on Option Prices
• 9.3 Comparing Options with Respect to Contract Characteristics
• 9.3.1 Strike Price
• 9.3.2 Maturity
• 9.4 Early Exercise Decisions for American Options
• 9.4.1 Proof 1: A Proof Based on No-arbitrage Bounds
• 9.4.2 Proof 2: A Cost-benefit Dissection Proof
• 9.4.3 Early Exercise Criterion for American Puts
• 9.5 Problems
• Appendix A Standard Normal Distribution Table
• Appendix B Solutions to Odd-Numbered End-of-Chapter Problems
• B.1 Chapter 1
• B.2 Chapter 2
• B.3 Chapter 3
• B.4 Chapter 4
• B.5 Chapter 5
• B.6 Chapter 6
• B.7 Chapter 7
• B.8 Chapter 8
• B.9 Chapter 9
• Bibliography
• Index