Class Schedule: PhD Module 1. (5 Weeks) Spring, 2013

Week 1

• Introduction
• Ito's Lemma
• Course Material:
  • Chapters 13, 14, and 18 in Hull.
  • Slide set 1.
  • Slide set 2.
  • Corresponding Comprehensive Exam Questions.

Week 2

• Time-varying volatilities and options
  • Course Material:
    • Chapters 19, 20, and 22 in Hull.
  • Activity: Write a program to estimate a GARCH(1,1) model using the method of MLE, and estimate on daily stock return data from CRSP. --due on Jan 23.
  • Slides.
  • Corresponding Comprehensive Exam Questions.

Week 3

• Implied densities and empirical issues.
  • Course Material:
    • Chapters 25, 26, and 27 in Hull
    • Papers:
      • Breeden and Litzenberger, Journal of Business, 1978.
      • Banz and Miller, Journal of Business, 1978.
      • Jackwerth, Journal of Derivatives, Winter 1999.
      • Dupire, Risk, 1994.
      • Derman and Kani, Risk, 1994.
      • Cont, ``Beyond Implied Volatility.''
      • Rompolis and Tzavalis, JFQA, 2008.
  • Slides.
  • Corresponding Comprehensive Exam Questions.

Week 4

• Empirical Work
  • Course Material:
    • Slides.
    • Spreadsheet demonstrating Implied Binomial Trees.
    • Papers:
      • Buraschi and Jackwerth, RFS 2001.
      • Coval and Shumway, JF 2001.
      • Branger and Schlag, ``Put Options are not Too Expensive,'' 2005.
      • Doran, Journal of Risk, 2007.
      • Branger and Schlag, JFQA, 2008.
      • Broadie, Chernov, and Johannes, RFS 2009.
      • Constantinides, Jackwerth, and Savov, ``The Puzzle of Index Option Returns,'' 2009.

Week 5

• Empirical Options Project due.
• Limits to Arbitrage and Options.
• Course Material:
• Slides.
  • Papers:
    • Gromb and Vayanos 2010 Survey.
    • Bollen and Whaley, JF 2004.
    • Evans, Geczky, Musto, and Reed, RFS 2009.
    • Cremers and Weinbaum JFQA 2010.
    • Frazzini and Pedersen 2011.

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