SYLLABUS
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A variety of securities
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3.1 Option pricing for
3 FORECASTING WITH UNCERTAINTY
3.1 Option pricing for dummies
3.2 Simple valuation model using binomial trees
3.3 Improved model using stochastic calculus
3.3.1 Wiener process and martingales
3.3.2 Itô lemma
3.3.3 Evaluate an expectancy or eliminate the uncertainty
3.4 Hedging an option with the underlying (Black-Scholes)
3.5 Hedging a bond with another bond (Vasicek)
3.6 Computer quiz
3.7 Exercises
3.8 Further reading and links
3.9 Quick intermediate evaluation form