a. describe and interpret the binomial option valuation model and its component terms;

b. calculate the no-arbitrage values of European and American options using a two-period binomial model;

c. identify an arbitrage opportunity involving options and describe the related arbitrage;

f. describe how the value of a European option can be analyzed as the present value of the option's expected payoff at expiration;

d. describe how interest rate options are valued using a two-period binomial model;

e. calculate and interpret the value of an interest rate option using a two-period binomial model;

g. identify assumptions of the Black-Scholes-Merton option valuation model;

h. interpret the components of the Black-Scholes-Merton model as applied to call options in terms of a leveraged position in the underlying;

i. describe how the Black-Scholes-Merton model is used to value European options on equities and currencies;

j. describe how the Black model is used to value European options on futures;

l. interpret each of the option Greeks;

m. describe how a delta hedge is executed;

n. describe the role of gamma risk in options trading;

o. define implied volatility and explain how it is used in options trading.