- Technology and Invention in Finance
- Financial Markets: Course Introduction
- Risk and Financial Crises
- Portfolio Diversification and Supporting Financial Institutions
- Insurance, the Archetypal Risk Management Institution
- Barron's Criticism, Determinants of Investment Return
- Lecture 7 - Efficient Markets
- Lecture 8 - Theory of Debt, Its Proper Role, Leverage Cycles
- Lecture 9 - Corporate Stocks
- Lecture 10 - Real Estate Finance
- Lecture 11 - Behavioral Finance
- Lecture 12 - Misbehavior, Crises, Regulation and Self Regulation
- Lecture 13 - Overview of Banks
- Lecture 14 - A Brief History of AIG with Maurice "Hank" Greenberg
- Lecture 15 - Forward and Futures Markets
- Lecture 16 - Banking and Regulations in China with Laura Cha
- Lecture 17 - Options Markets
- Lecture 18 - Monetary Policy
- Lecture 19 - Overview of Investment Banking
- Lecture 20 - Professional Money Managers and Their Influence
- Lecture 21 - Exchanges, Brokers, Dealers, Clearinghouses
Lecture 17 - Options Markets
After introducing the core terms and main ideas of options in the beginning of the lecture, Professor Shiller emphasizes two purposes of options, a theoretical and a behavioral purpose.
Subsequently, he provides a graphical representation for the value of a call and a put option, and, in this context, addresses the put-call parity for European options. Within the framework of the Binomial Asset Pricing model, he derives the value of a call-option from the no-arbitrage-principle, and, as a continuous-time analogue to this formula, he presents the Black-Scholes Option Pricing formula. He contrasts implied volatility, as represented by the VIX index of the Chicago Board Options Exchange, which uses a different formula in the spirit of Black-Scholes, with the actual S\&P Composite volatility from 1986 until 2010.
Professor Shiller concludes the lecture with some thoughts about options on single-family homes that he launched with his colleagues of the Chicago Mercantile Exchange in 2006.
1. Examples of Options Markets and Core Terms\ 2. Purposes of Option Contracts\ 3. Quoted Prices of Options and the Role of Derivatives Markets\ 4. Call and Put Options and the Put-Call Parity\ 5. Boundaries on the Price of a Call Option\ 6. Pricing Options with the Binomial Asset Pricing Model\ 7. The Black-Scholes Option Pricing Formula\ 8. Implied Volatility - The VIX Index in Comparison to Actual Market Volatility\ 9. The Potential for Options in the Housing Market
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