Slides are posted for today’s class. See sidebar to the right.

See you in class.

I’ve uploaded the slides which were not present earlier, so all the slides from yesterday are online.

Also, just a note about yesterday’s spreadsheet on expected futures risk. The spreadsheet is correct. The implied futures price (F0, which is known at time 0) does not change for the three different betas. The expected return changes along with the beta and keeps F0 constant, even though the expected spot price (E(ST), which is not known at time 0) changes.

The team that spotted this point will not have its point deducted. Again, F0 will not change for changes in E(ST), simply because the expected return increases or decreases in relation to the risk-free rate, and ensures that F0 is constant.

If you have any questions on this, feel free to drop me a line.

If you downloaded the slides over the weekend, a few slides have been added, and a few others have been updated. Except for one slide (Slide #10) there are no major changes.

Please use this version for class tomorrow. Thanks.

On Vic’s request, I’ve posted the solutions to HW3 so you can study from them for tomorrow’s quiz. They are in the ‘Handouts’ section for Lecture 5 (tomorrow’s lecture) – to the right.

Note that we have not covered some things from Chapter 5 (forward valuation, storage costs) from the HW. Don’t worry about those as far as Quiz 2 is concerned.

Also, I will be going over the HW at the start of class (before the quiz).

Good luck.