can you please fill out this study guide

1. Know the definitions, payoff graphs, payoff tables and profit graphs of the following from both the long position and the short position:

a. Stock/stock index

b. Bond (zero-coupon) aka cash

c. Forward

d. Call option

e. Put option

2. Understand the effect of time value of money in calculating profit equations using continuously compounded interest.(Profit = Payoff FV(Cost)). Also understand the effect of time value of money in regard to the payoff and cost of a bond.

3. Know how the instruments listed in (1.) can be combined to get other financial instruments. For example: call spread, butterfly spread, straddle, etc. You will not need to memorize the names of these combinations.

4. Determine the breakeven points of portfolios of financial instruments, such as straddles, and the maximum and minimum profits of the portfolio, etc.

5. Understand the put-call parity relationship and how it can be used to determine prices of one instrument in terms of other instruments. The financial instruments include stocks with no dividends, stocks with continuous dividends, and foreign currency exchange rates.

6. Know the relationship between spot prices (price as of time 0) and forward prices (prices at some future time, T). The underlying instrument can be a stock (with or without continuous dividends) and foreign currency exchange rates.

7. Understand how an S&P 500 futures contract works and be able to calculate: (1) notional amount; (2) initial margin balance; (3) maintenance margin (4) future margin balances; (5) margin calls, etc.

8. Know how to take advantage of arbitrage opportunities if any financial asset is mispriced by creating a synthetic version of the financial asset. Know the ingredients of an arbitrage portfolio by buying (long) low and selling (short) high. Be able to show via a payoff table that you have created an arbitrage portfolio.

9. Know the relationships of prices (including upper and lower bounds) of European and American calls and puts. This includes knowing the relationships with different strike prices, or different times to maturity.

10. Know how to price both European and American optionson stocks with no dividends using the binomial tree model (one-step and two-step); both using the replicating portfolio method and the risk-neutral probability method. Know how to calculate u and d from the formula using the stocks volatility and how to calculate p*.

11. Know how to calculate the price of options on stocks (with and without dividends) using the Black-Scholes model.

12. Know the formula for the Greek, delta, for call options and put options from the Black-Scholes model. Know how to use delta, theta, and gamma to estimate how the price of the option changes as the underlying stock price changes.

13. Be able to calculate the delta of a portfolio, given the deltas of the instruments within the portfolio. This means you need to know that (stock) = 1, (bond) = 0 and, for non-dividend paying stocks, (put) = (call) 1.