At our class meeting on April 7, we will discuss the use of the Black Scholes Option Pricing model to estimate both the beta risk and the residual risk that an option position contributes to an investment portfolio, with particular attention to the impact of option positions on the portfolio risk measures that are used in assessing a portfolios risk-adjusted performance. The lecture notes related to this material are Options and Portfolio Risk. The homework problems related to our discussion of options and portfolio risk are Homework Set 6. Additionally, we will be discussing market efficiency although the time available may limit our discussion to the Allan Marcus paper on "The Magellan Fund and Market Efficiency". The attached notes Tests of Market Efficiency, provide a brief overview of some of the relevant research and principles related to market efficiency along with the results of some behavioral research on investor sentiment and internet postings.
During the semester, I plan to make assigned homework, spreadsheet assignments, detailed homework solutions, and selected notes for some of my lectures available either on this Web location or on the WebCT site for the course. Although much of this material is currently listed below, these materials may be revised extensively prior to becoming available here on the Webb page. As you might expect, suggested solutions for the required homework will be unavailable until after the due date for the assignment.
Click on the highlighted file name to download the Course Syllabus for Finance 6310.
Students in Finance 6310 are encouraged to participate actively during classroom lectures by raising questions pertaining to investment terminology, the instutional details related to financial instruments and trading, or other issues related to classroom lectures. When I don't know the answer to your question, I will find out and answer you at the next class meeting. It is important for you to feel at ease in asking questions, and to remember that there are very few unimportant or irrelevant questions about the workings of financial markets. In spite of my desire to provide a forum for student questions, questions sometimes go unanswered because a student "didn't want to interupt me while I was on a roll". If this happens, please send me an e-mail message or come by to see me during office hours. I will be glad to answer your question. When your question is particularly good (meaning that I think that the rest of the class would like to discuss the answer to your question), I will list your question (without attribution) below and provide my best answer, which naturally can be the source of additional questions during future classroom discussions.
The spreadsheet model used in class on February 19 to infer implied volatilities from the prices of put and call options is available as Implied Volatility.
The suggested solutions to Homework Sets will be made available two weeks after distribution at
solutions to assigned homework
Once you have logged into the webct site for the course, click on the Homework Solutions
icon on the homepage. Clicking on this icon gives you access to the WebCT tool
pages where the homework solutions are stored.
Return to Finance 6301
The Stock-Trak investment simulation that we will conduct this semester incorporates most of the features of actual on-line investing. In fact, as was noted in class, simulated trading with Stock-Trak exposes your class account to certain risks that you do not have to deal with in actual markets. To be sure that you fully understand the dynamics of on-line investing, as well as the institutional requirements on margin accounts, you should familiarize yourself with the following information.
The internet has become a repository for a great deal of investment commentary/analysis in the form of bulletin boards where individual investors are permitted to post their 'analysis' and commentary concerning the investment merits of various stocks. Investors must use great care with respect to both consuming and disseminating investment information on the internet. The Securities and Exchange Commission is particularly concerned about attempts to manipulate stock prices through the dissemination of information that is known (or should have been known) to be false. The links below provides additional information on the SEC Internet Enforcement Program and recent enforcement activities, as well as cautionary information concerning investment scams that you may encounter on the internet.
Exchange-Traded funds permit investors to trade well-known stock index portfolios just like individual stocks. The American Stock Exchange Web site provides information on the beta risk and fundamentals of virtually all of the ETF's listed for trading on the AMEX. ETF zone provides links to articles on ETF's, as well as information concerning ETF's traded on foreign markets.
Click on the highlighted file name to download all files. Given the relatively large number of formulas contained in the solutions to homework exercises, these documents have been saved in a format that you will be unable to view from my Webb page. However, all of these documents can be downloaded to your PC. Once you have the document on your PC, you may examine the document visually using Word, Word Perfect, or other word processing packages and/or print out a copy for yourself. Due to a change in the format relative to the format used to create these documents, I apologize in advance for the fact that some of the original pages may require an additional page when printed out.
To download spreadsheet data sets, click on the link and scroll down to "Save this link as..." .