Options Markets -Year 2008 Financial Markets (ECON 252) Options introduce an essential nonlineary into portfolio management. They are contracts between buyers and writers, who agree on exercise prices and dates at which the buyer can buy or sell the underlying (such as a stock). Options are priced based on the price and volatility of the underlying asset as well as the duration of the option contract. The Black-Scholes options pricing model is one of the most famous equations in finance and offers a useful first approximation for prices for option contracts. Options exchanges and futures exchanges both are involved in creating a liquid and transparent market for options. Options are not just for stocks; they are also important for other asset classes, such as real estate. 00:00 - Chapter 1. Options Vocabulary and the 1720 Stock Market Crash 14:58 - Chapter 2. The Standardization and Logic of Options: Options Exchanges 27:57 - Chapter 3. The Put-Call Parity Relation 36:32 - Chapter 4. Pricing an Option: The Black-Scholes Formula 51:35 - Chapter 5. Accounting for Volatility in the Black-Scholes Formula 01:00:08 - Chapter 6. Options on Home Prices as Risk Management Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses This course was recorded in Spring 2008.
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