https://gdpark.blog/series/derivatives-i-studied/Recent content in Derivatives I Studied on gdpark.blogHugoenSat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-01-introduction-to-derivatives/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-01-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.https://gdpark.blog/posts/derivatives-02-structure-of-futures-markets/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-02-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.https://gdpark.blog/posts/derivatives-03-hedging-strategies-using-futures/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-03-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.https://gdpark.blog/posts/derivatives-03-linear-regression-in-finance/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-03-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.https://gdpark.blog/posts/derivatives-04-interest-rates/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-04-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.https://gdpark.blog/posts/derivatives-05-determining-forward-and-futures-prices/Sat, 15 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-05-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.https://gdpark.blog/posts/derivatives-06-interest-rate-futures/Wed, 19 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-06-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.https://gdpark.blog/posts/derivatives-07-fundamentals-of-interest-rate-swaps/Wed, 19 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-07-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.https://gdpark.blog/posts/derivatives-08-swaps/Mon, 21 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-08-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.https://gdpark.blog/posts/derivatives-09-swaps-practice-problems/Tue, 22 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-09-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.https://gdpark.blog/posts/derivatives-10-options/Mon, 28 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-11-properties-of-stock-options/Mon, 28 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-12-options-practice-problems/Mon, 28 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-13-options-trading-strategies-part-1-spreads-bull-spread-bear-s/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-13-options-trading-strategies-part-1-spreads-bull-spread-bear-s/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.https://gdpark.blog/posts/derivatives-14-options-trading-strategies-part-2-combinations-and-practice/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-14-options-trading-strategies-part-2-combinations-and-practice/Wrapping up options combinations — straddles, strangles, strips, and straps — and figuring out which one to pick depending on your vol view and your wallet.https://gdpark.blog/posts/derivatives-15-binomial-option-pricing-model-basics/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-16-deriving-the-black-scholes-formula-from-the-binomial-model/Thu, 15 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-17-black-scholes-formula-practice-problems/Fri, 16 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-18-stock-index-options-and-currency-options/Fri, 16 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-19-stock-index-options-and-currency-options-practice-problems/Sat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-20-the-greeks/Sat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.https://gdpark.blog/posts/derivatives-21-the-greeks-practice-problems/Sat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-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.