Table of Contents

Introduction

1: Contact Settlement and Cash Flow

2: Forward Pricing

3: Contract Specifications and Terminology

4: Expiration Profit and Loss

5: Theoretical Evaluation

6: Volatility

7: Risk Measurement

8: Delta Neutral Positions and Dynamic Hedging

9: The Dynamics of Risk

10: Spreading Strategies

11: Synthetic Equivalents

12: Synthetic Pricing and Arbitrage

13: Early Exercise of American Options

14: The Black-Scholes Model

15: Binomial Pricing

16: Hedging Strategies

17: Models and the Real World

18: Skewness and Kurtosis

19: Stock Indexes

20: Risk Analysis

Appendix: Useful Formulas and Relationships

Answer Key

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