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hull

  1. Nicole Seaman

    P1.T3.731. Lookback and Asian (exotic) options (Hull Chapter 26 cont.)

    Learning objectives: Identify and describe the characteristics and pay-off structure of the following exotic options: gap, forward start, compound, chooser, barrier, binary, lookback, shout, Asian, exchange, rainbow, and basket Questions: 731.1. Consider the price of an asset that begins and...
  2. Nicole Seaman

    P1.T3.722. Using the swap rate to bootstrap the forward rate and basic interest rate swap valuation

    Learning objectives: Explain the mechanics of a plain vanilla interest rate swap and compute its cash flows ... Calculate the value of a plain vanilla interest rate swap based on two simultaneous bond positions. Calculate the value of a plain vanilla interest rate swap from a sequence of forward...
  3. Nicole Seaman

    P1.T3.721. Eurodollar futures contracts and duration-based hedging (Hull)

    Learning objectives: Calculate the final contract price on a Eurodollar futures contract. Describe and compute the Eurodollar futures contract convexity adjustment. Explain how Eurodollar futures can be used to extend the LIBOR zero curve. Calculate the duration-based hedge ratio and create a...
  4. Nicole Seaman

    P1.T3.719. Quoted versus cash bond prices (Hull Chapter 6)

    Learning objectives: Identify the most commonly used day count conventions, describe the markets that each one is typically used in, and apply each to an interest calculation. Calculate the conversion of a discount rate to a price for a US Treasury bill. Differentiate between the clean and dirty...
  5. Nicole Seaman

    P1.T3.718. Cost of carry with cash flow and normal backwardation (Hull Chapter 5)

    Learning objectives: Calculate, using the cost-of-carry model, forward prices where the underlying asset either does or does not have interim cash flows. Describe the various delivery options available in the futures markets and how they can influence futures prices. Explain the relationship...
  6. Nicole Seaman

    P1.T3.716. Arbitrage and the cost of carry model (Hull Chapter 5)

    Learning objectives: Differentiate between investment and consumption assets. Define short-selling and calculate the net profit of a short sale of a dividend-paying stock. Describe the differences between forward and futures contracts and explain the relationship between forward and spot prices...
  7. Nicole Seaman

    P2.T5.706. Risk-free rate in derivatives valuation and volatility smiles (Hull Chapters 9 and 10)

    Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
  8. Nicole Seaman

    P1.T3.713. Spot and forward rates in bond pricing (Hull Chapter 4)

    Learning objectives: Calculate the theoretical price of a bond using spot rates. Derive forward interest rates from a set of spot rates. Derive the value of the cash flows from a forward rate agreement (FRA). Questions: 713.1. Consider the steep spot (aka, zero) rate curve illustrated below...
  9. Nicole Seaman

    P1.T3.712. Interest rate fundamentals (Hull Chapter 4)

    Learning objectives: Describe Treasury rates, LIBOR, and repo rates, and explain what is meant by the “risk-free” rate. Calculate the value of an investment using different compounding frequencies. Convert interest rates based on different compounding frequencies. Questions: 712.1. Interest...
  10. Nicole Seaman

    P1.T3.711. Optimal cross-hedge and reducing portfolio beta (Hull Chapter 3 continued)

    Learning objectives: Define cross hedging, and compute and interpret the minimum variance hedge ratio and hedge effectiveness. Compute the optimal number of futures contracts needed to hedge an exposure, and explain and calculate the “tailing the hedge” adjustment. Explain how to use stock index...
  11. Nicole Seaman

    P1.T3.710. Long and short hedges (Hull Chapter 3)

    Learning objectives: Define and differentiate between short and long hedges and identify their appropriate uses. Describe the arguments for and against hedging and the potential impact of hedging on firm profitability. Define the basis and explain the various sources of basis risk, and explain...
  12. Nicole Seaman

    P1.T3.709. Futures contracts (Hull Chapter 2, continued)

    Learning objectives: Explain the convergence of futures and spot prices. Describe the role of a clearinghouse in futures and over-the-counter market transactions. Describe the role of collateralization in the over-the-counter market and compare it to the margining system. Identify the...
  13. Nicole Seaman

    P1.T3.708. Futures contracts (Hull Chapter 2)

    Learning objectives: Define and describe the key features of a futures contract, including the asset, the contract price and size, delivery, and limits. Describe the rationale for margin requirements and explain how they work. Describe the mechanics of the delivery process and contrast it with...
  14. Nicole Seaman

    P1.T3.707. Hedging versus speculation (Hull Chapter 1)

    Learning objectives: Describe the over-the-counter market, distinguish it from trading on an exchange, and evaluate its advantages and disadvantages. Differentiate between options, forwards, and futures contracts. Identify and calculate option and forward contract payoffs. Calculate and compare...
  15. Nicole Seaman

    P1.T3.706 Hedge funds (Hull)

    Learning objectives: Calculate the return on a hedge fund investment and explain the incentive fee structure of a hedge fund including the terms hurdle rate, high-water mark, and clawback. Describe various hedge fund strategies, including long/short equity, dedicated short, distressed...
  16. Nicole Seaman

    P1.T3.705. Mutual funds (Hull)

    Learning objectives: Differentiate among open-end mutual funds, closed-end mutual funds, and exchange-traded funds (ETFs). Calculate the net asset value (NAV) of an open-end mutual fund. Explain the key differences between hedge funds and mutual funds. Questions: 705.1 America's Best Fund...
  17. Nicole Seaman

    P1.T3.704. Insurance company regulations and pension funds (Hull)

    Learning objectives: Distinguish between mortality risk and longevity risk and describe how to hedge these risks. Evaluate the capital requirements for life insurance and property-casualty insurance companies. Compare the guaranty system and the regulatory requirements for insurance companies...
  18. Nicole Seaman

    P1.T3.703. Insurance company ratios (Hull)

    Learning objectives: Calculate and interpret loss ratio, expense ratio, combined ratio, and operating ratio for a property-casualty insurance company. Describe moral hazard and adverse selection risks facing insurance companies, provide examples of each, and describe how to overcome the...
  19. Nicole Seaman

    P1.T3.702. Life insurance products and mortality tables (Hull)

    Learning objectives: Describe the key features of the various categories of insurance companies and identify the risks facing insurance companies. Describe the use of mortality tables and calculate the premium payment for a policy holder. Questions: 702.1. Below is an extract (selected rows)...
  20. Nicole Seaman

    P1.T3.701. Basic bank functions and definitions (Hull)

    Learning objectives: Explain how deposit insurance gives rise to a moral hazard problem. Describe investment banking financing arrangements including private placement, public offering, best efforts, firm commitment, and Dutch auction approaches. Describe the potential conflicts of interest...
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