DER 07.1 Stock derivatives

The derivatives valuation/risk management principles developed in previous sections can be applied straightforwardly to stock derivatives. The discrete income version of the cost of carry is applied since cash dividends on stocks are paid quarterly. 

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• Required reading

  • Whaley, 2006, Ch. 11, Stock products

  • Frankel, 2012, Dividend play in S&P 500 ETF goes awry, costs traders $20 million

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• Lecture notes

  • Slides

  • Supporting files​

    • Early exercise of call.xlsx

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