1. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-1

2. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-2 Part II Valuing Financial Assets

3. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-3 Chapter 7 Pricing Derivatives

4. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-4 Exhibit 7.1: The Exchange of an Asset for Cash in a Forward Contract at Maturity

5. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-5 Exhibit 7.2: Currency Trading Source: Reprinted by permission of The Wall Street Journal, © 2000 by Dow Jones & Company. All rights Reserved.

6. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-6 Exhibit 7.3: Futures Prices for Currency Source: Reprinted by permission of The Wall Street Journal, © 2000 by Dow Jones & Company. All Rights Reserved Worldwide.

7. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-7 Exhibit 7.4: Futures Prices for Oil Source: Reprinted by permission of The Wall Street Journal, © 2000 by Dow Jones & Company. All Rights Reserved.

8. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-8 Exhibit 7.5: The Cash Flows of a Five-Year Semiannual Fixed for Floating Interest Rate Swap: $100 Notional

9. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-9 Exhibit 7.6: The Cash Flows of a Five-Year Annual Yen-Dollar Fixed-Rate Currency Swap: $100 Notional

10. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-10 Exhibit 7.7: The Value of a Call Option and a Put Option at Expiration

11. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-11 Exhibit 7.8: Listed Options Quotations Source: Reprinted by permission of The Wall Street Journal, © 2000 by Dow Jones & Company. All Rights Reserved Worldwide.

12. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-12 Exhibit 7.9: One-Period Binomial Trees

13. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-13 Exhibit 7.10: Future Prices

14. Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-14 Exhibit 7.11: Forward Price Paths (in $ millions) and Derivative Values (in $ millions) in a Two-Period Binomial Tree