Series
10 posts
Kicking off a derivatives series with a skim of Hull Chapter 1 — futures vs. options, hedging vs. speculation, and the quiz-first study method.
A Q&A rundown of futures market basics — open interest, margin calls, stop vs. limit orders, and how hedgers and speculators get taxed differently.
A quiz-style walkthrough of futures hedging — short vs long hedges, basis risk, optimal hedge ratios, and beta reduction with index futures.
A from-scratch derivation of linear regression — why we square the errors, how to find the best-fit slope and intercept, and why this shows up everywhere in finance.
A worked-through tour of the interest rate zoo — compounding conventions, LIBOR vs LIBID, spot and forward rates, FRAs, and bond pricing, all with quiz solutions.
A casual walkthrough of how interest rate swaps actually work — fixed vs. floating rates, notional principal, and why companies would sign up for this in the first place.
A casual breakdown of how interest rate swaps work — exchanging fixed and floating payments on a notional principal, and why anyone would actually do that.
A casual intro to options — call vs. put, why theoretical prices even matter, and how Black-Scholes blew the whole market wide open.
Extending Black-Scholes to handle dividends, stock index options, and currency options — turns out it's basically the same trick each time.
Practice problems on currency and stock index options — lower bounds, put-call parity, Black-Scholes puts, and hedging a portfolio with index puts.