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#41
06-09-2012, 02:02 PM
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informal thoughts on put-call parity
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Put-call parity is an equation that allows you to show that certain combinations of puts/calls/forwards result in the same payoff. I think of put-call parity like this: You either own (1) a stock (long forward) and (2) the right to sell it at a certain strike price, -or- you have (3) the right to buy it at the same strike price and you also have (4) PV of cash that will accumulate to the strike price. It turns out that both positions produce the same payoff. *Note: (1) is worth the PV of the forward price of the stock at time 0. (Abbreviated easy-to-remember way: Have stock & right to sell it, or have cash and right to buy.) These two positions have the same payoff. So Stock + put = call + cash. (You can read this as "long (forward) stock and put = long call and PV(strike in cash).") You can rearrange this as needed, e.g. Stock - call = cash - put (Left side = long stock and short call = written covered call). Terms with minus signs can be thought of as short positions. I hope this helps! Last edited by chriwils; 06-09-2012 at 02:25 PM.. 
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#42
06-11-2012, 02:49 PM
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Advice for learning calls and puts
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First of all, the mental image that you'll burn into your mind will give you a clear sense of what each does, why it's beneficial, and when to use it. The other reason is that it will become much easier to remember the combination graphs when you hit section 16c (in the ASM 11th edition manual), which is, indeed, a scary place (I just finished working through it today). Don't be afraid to take the extra time to draw these out - it will be worth it in the end!
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#43
06-11-2012, 02:54 PM
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However, I'm in chapter 17 (of 19) now, and I received the manual in early May. After finishing part I (but before heading into derivatives), I sat down with the SOA practice questions and was able to destroy almost all of them in about 2 hours (which is a LOT quicker and with much more accuracy than when I looked at them before starting with the manual). Once I finish up derivatives, I'll probably look at the SOA derivatives problems and then return to take the 6 practice exams in the ASM book. As long as you don't stop/slow down too much, you'll probably be able to finish the entire thing in a month-and-a-half to two months.
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#44
06-12-2012, 12:51 PM
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just ordered the Actex to get me through the financial ders secions.
If you want to practice problems non-financial der related, here is a good site-- http://www.saab.org/act123.html (must use firefox for some reason) I just finished all the old material and have been working through problems as I wait for the actex to arrive. How is everyone's confidence doing? only 2 months to go.
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#45
06-20-2012, 07:21 PM
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How's everyone doing studying? I am finishing up with Chapter 6 this week, so I'm about halfway through the actual material. Been sticking to my schedule, should finish with three weeks of just practice problems.
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#48
06-24-2012, 03:47 PM
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I just signed up for the August 15th sitting. I have been studying using the ASM manual and am just finishing up the interest theory section. I plan to finish the derivative market section by the last week of July and then do practice exams and the SOA sample problems.
Best of luck to everyone!
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#49
06-26-2012, 01:01 PM
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Good luck!
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