Derivatives

A Discussion of Financial Economics in actuarial Models A Preparation for the Actuarial mental test MFE/3F
Marcel B. Finan are Tech University c All Rights Reserved Preliminary compose October 10, 2011

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To Pallavi and Amin

Preface
This is the third of a series of books intended to help individuals to retrogress actuarial exams. The present manuscript covers the ?nancial economics segment of Exam M referred to by MFE/3F. The ?ow of topics in the book follows very close that of McDonalds Derivatives Markets. The book covers designated sections from this book as suggested by the 2009 SOA Syllabus. The recommended overture for using this book is to read each section, work on the embedded examples, and then try the problems. Answer keys are provided so that you check your numerical answers against the correct ones. Problems taken from previous SOA/CAS exams get out be indicated by the symbol ‡. This manuscript can be used for personal use or class use, and not for commercial purposes. If you ?nd any errors, I would hold hearing from you: m?nan@atu.edu

Marcel B. Finan Russellville, Arkansas whitethorn 2010

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PREFACE

Contents
Preface mirror symmetry and Other Price Options Properties 1 A Review of Options . . . . . . . . . . . . . . . . . . . . . . . . . .



2 Put-Call parity for European Options . . . . . . . . . . . . . . . . 3 Put-Call Parity of Stock Options . . . . . . . . . . . . . . . . . . . 4 Conversions and Reverse Conversions . . . . . . . . . . . . . . . . . 5 Parity for notes Options . . . . . . . . . . . . . . . . . . . . . . 6 Parity of European Options on Bonds . . . . . . . . . . . . . . . . 7 Put-Call Parity Generalization . . . . . . . . . . . . . . . . . . . . 8 Labeling Options: Currency Options . . . . . . . . . . . . . . . . . 9 No-Arbitrage Bounds on Option Prices . . . . . . . . . . . . . . . . 10 General Rules of Early Exercise on American Options . . . . . . . 11 E?ect of Maturity beat Growth on Option Prices . . . . . . . . . 12...If you want to get a full essay, order it on our website: Ordercustompaper.com



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