Series
Derivatives I Studied
22 posts
- #1
Introduction to Derivatives
Kicking off a derivatives series with a skim of Hull Chapter 1 — futures vs. options, hedging vs. speculation, and the quiz-first study method.
· 10 min read - #2
Structure of Futures Markets
A Q&A rundown of futures market basics — open interest, margin calls, stop vs. limit orders, and how hedgers and speculators get taxed differently.
· 14 min read - #3
Hedging Strategies Using Futures
A quiz-style walkthrough of futures hedging — short vs long hedges, basis risk, optimal hedge ratios, and beta reduction with index futures.
· 15 min read - #3
Linear Regression in Finance
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.
· 5 min read - #4
Interest Rates
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.
· 15 min read - #5
Determining Forward and Futures Prices
A quiz-style rundown of how forward and futures prices actually work — short selling, convenience yield, cost of carry, and why copper isn't gold.
· 18 min read - #6
Interest Rate Futures
Working through quiz problems on T-bond accrued interest, conversion factors, Eurodollar futures P&L, convexity adjustments, and duration-based portfolio hedging.
· 23 min read - #7
Fundamentals of Interest Rate Swaps
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.
· 8 min read - #8
Swaps
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.
· 19 min read - #9
Swaps: Practice Problems
Working through classic swap design problems — comparative advantage, LIBOR discounting, and currency swaps — with the actual numbers worked out step by step.
· 9 min read - #10
Options
A casual intro to options — call vs. put, why theoretical prices even matter, and how Black-Scholes blew the whole market wide open.
· 19 min read - #11
Properties of Stock Options
Breaking down every variable that moves option prices — S, K, T, σ, r, and D — and why European vs. American options handle time to expiration differently.
· 13 min read - #12
Options: Practice Problems
Working through options pricing problems — lower bounds on calls and puts, why American options always beat intrinsic value, and when put-call parity breaks down.
· 5 min read - #13
Options Trading Strategies (Part 1): Spreads — Bull Spread, Bear Spread, Box Spread, Butterfly Spread, Calendar Spread
We finally stop staring at one lonely option and start building real portfolios — covered calls, protective puts, and every spread you'd want to know.
· 13 min read - #14
Options Trading Strategies (Part 2): Combinations and Practice Problems
Wrapping up options combinations — straddles, strangles, strips, and straps — and figuring out which one to pick depending on your vol view and your wallet.
· 7 min read - #15
Binomial Option Pricing Model: Basics
A copy-paste deep dive into the binomial option pricing model — covering one-period basics, risk-free portfolios, and how to pin down a call option's theoretical price.
· 13 min read - #16
Deriving the Black-Scholes Formula from the Binomial Model
Turns out if you just crank n to infinity in the binomial model, the Black-Scholes formula pops right out — so let's do exactly that instead of going the hard way.
· 7 min read - #17
Black-Scholes Formula: Practice Problems
Working through Chapter 13 Black-Scholes practice problems — from log-normal returns and Geometric Brownian Motion to actually pricing European call options.
· 4 min read - #18
Stock Index Options and Currency Options
Extending Black-Scholes to handle dividends, stock index options, and currency options — turns out it's basically the same trick each time.
· 8 min read - #19
Stock Index Options and Currency Options: Practice Problems
Practice problems on currency and stock index options — lower bounds, put-call parity, Black-Scholes puts, and hedging a portfolio with index puts.
· 4 min read - #20
The Greeks
A casual walkthrough of why hedging exists and a few 'dumb' strategies before the real stuff — delta hedging — explained like chatting with someone in the field.
· 11 min read - #21
The Greeks: Practice Problems
Working through Greeks practice problems — stop-loss strategies, futures option deltas, and hedging a short call position on silver futures.
· 10 min read