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a. Binomial Model

    (1) One-Period Binomial Model

        (a) Construction of a Risk-Free Portfolio

        (b) Binomial Pricing Formula

        (c) Executing an Arbitrage

    (2) Multiperiod Binomial Model

        (a) Dynamic Construction of a Risk-Free Portfolio

        (b) Multiperiod Pricing Formula

        (c) Executing an Arbitrage

        (d) Limiting Cases

    (3) Incorporating Dividends into the Binomial Model

    (4) Exercising an Option Early in the Binomial Model

b. Black-Scholes Model

    (1) The Mathematical Structure

        (a) Lognormal Distribution

        (b) Brownian Motion/Wiener Processes

        (c) Martingales

        (d) Stochastic Calculus

        (e) Itô’s Lemma

        (f) Stochastic Differential Equations

    (2) Constructing and Dynamically Adjusting a Risk-Free Portfolio

        (a) The Self-Financing Property

        (b) Dynamic Adjustment of Portfolio

    (3) Solving the Option Pricing Problem: The Black-Scholes Formula

        (a) The Martingale Approach

        (b) The Partial Differential Equation Approach

        (c) Numerical Solutions: The Binomial Revisited

        (d) Numerical Solutions: Finite Difference Method

        (e) Monte Carlo Simulation

    (4) The Black-Scholes Formula

        (a) Properties of the Formula

        (b) Calculation Using the Formula

    (5) Sensitivity of the Formula to the Inputs: The Option Greeks

        (a) Stock Price: Delta and Gamma

        (b) Exercise Price

        (c) Risk-Free Rate: Rho

        (d) Time to Expiration: Theta

        (e) Volatility: Vega (Kappa)

        (f) Dividends: Dividend Rho

        (g) Omega: Elasticity

        (h) Fugit: Expected Time to Exercise

    (6) Incorporating Dividends into the Formula

        (a) Discrete

        (b) Continuous