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Learning Outcome Statements PDF Download
|1. One-Period Binomial Model|
a. describe and interpret the binomial option valuation model and its component terms;
|2. Two-Period Binomial Model|
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;
|3. Interest Rate Options|
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;
|4. Black-Scholes-Merton Option Valuation 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;
|5. Black Option Valuation Model|
j. describe how the Black model is used to value European options on futures;
k. describe how the Black model is used to value European interest rate options and European swaptions;
|6. Option Greeks and Implied Volatility|
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.
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