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The term the Greeks refers to a set of mathematical equations used for deciphering the potential for movement in an options value versus the underlying stock or derivative position. Letters from the Greek alphabet are assigned to these equations, hence the name. Understanding how to use the Greeks effectively is critical to your ability to price options effectively and predict the risk and reward of an option. There are multiple levels of Greeks in option modeling

1. 2.

on the number of strike prices issued. This tendency for more options to expire as worthless increases the odds for the out-of-the-money call seller to have the option decrease in value or expire with no value. There are two ways of selling options: covered and naked. A naked short option is one that has no cover trade either in the underlying asset or in an option at another strike price. A covered option is a short option that has a covering trade in either the underlying asset or another option position at a different strike price. In this chapter we discuss naked options in order to get down the basics of option selling and the key signals that identify options with the qualities for successful selling and risk management. We go into depth on the multitude of covered option strategies in s 6, 7 and 8 on option spreads.

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Sirnilar laws prcvide workablemodelsin nranyotherareasof engineering science, and elecincluding the modeling of lluid dynurmics, masstransf'er. chernicalreactionkinetics. (Table19.1).The ability to accurately is derivativesan tricity, and solid mechanics estimate importantfacet of our capabilityto work effectivelyin theseareas. Beyond direct engineering and scientificapplications, numericaldifferentiationalso is importantin a variety of generalmathernatical contextsincluding otherareas numerjcal of methods.For example,recall that in Chap. 6 the secantmethod was basedon a finitedifferenceapproximation the derivative.ln addition,probablythe mostimportant of appliWe cation of numericaldifferentiationinvolvesthe solutionof differentialequations. have alreadyseenan examplein the fbrm of Euler's methodin Chap. 1. In Chap.22,wewillinvestigatehow numerical differentiationprovides the basis for solving boundary-value problemsof ordinary differentialequations. These arejust a few of the applicationsof differentiation that you might faceregularly you in the pursuitof your profession. When the functionsto be analyzed simple, willnorare mally chooseto evaluate when them analytically. However,it is oftendifficult or impossible the function is complicated. addition,the underlyingfunction is often unknown deIn and points.For both these you rnust fined only by measurement discrete at cases, have ability the valuesfor derivatives, next. to obtain approximate usingnumericaltechniques described as

Our current understanding of the anatomy and physiology of alertness comes largely from the elegant experiments of Bremer and of Magoun and Moruzzi in the 1930s and 1940s. Observing cats in whom he had sectioned the brainstem between the pons and midbrain and at the level of the lower medulla, Bremer found that the rostral section caused a sleep-like state and synchronized EEG rhythms that were characteristic of sleep; animals with the lower section remained awake, with appropriate desynchronized EEG rhythms. He interpreted this to mean, in large part correctly, that a constant stream of sensory stimuli, provided by trigeminal and other cranial sources, was required to maintain the awake state. Several years later, Morrison and Dempsey demonstrated a system of nonspeci c projections from the thalamus to all cortical regions, independent of any speci c sensory nucleus. A critical re nement of this concept resulted from the observation by Mor-

This is an open-book quiz. You may (and should) refer to the text as you solve these problems. Don t hurry! You ll find worked-out answers in App. C. The solutions in the appendix may not represent the only way a problem can be figured out. If you think you can solve a particular problem in a quicker or better way than you see there, by all means try it! 1. Solve the following pair of equations as a two-by-two system, including the complexnumber solutions, if any. Let x be the independent variable, and then define y as a function of x in each equation: 3x + y 1 = 0 and 2x 2 y + 1 = 0 2. Check the solution(s) to Prob. 1 in the original equations for correctness. 3. Solve the following pair of equations as a two-by-two system, including the complexnumber solutions, if any. Let x be the independent variable, and then define y as a function of x in each equation: 3x + y 1 = 0 and 2x 2 3x y + 3 = 0 4. Check the solution(s) to Prob. 3 in the original equations for correctness.

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14. When configuring a computer for network access, the computer name must: A. B. C. D. Be unique Match the names of the other computers on the network Match the computer s IP address Be entered only if you are using the NetBEUI protocol

Part III:

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