Tutorial lessons
MODULE 08 — Derivatives
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Lessons
Tutorial lessons
DER 1 Derivative Instrument and Derivative Market Features
What a derivative is, the underlyings it can reference, and how over-the-counter and exchange-traded markets differ. Check-yourself items are study aids. Derivative Features Earlier readings dealt wit
DER 2 Forward Commitment and Contingent Claim Features and Instruments
How forwards, futures, and swaps bind both sides to a future trade, while options and credit derivatives let one side choose, and what each pays at expiration. Check-yourself items are study aids. Fir
DER 3 Derivative Benefits, Risks, and Issuer and Investor Uses
Why market participants reach for derivatives, what can go wrong, and how the goals of issuers and investors pull in different directions. Check-yourself items are study aids. Derivative Benefits A de
DER 4 Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives
How no-arbitrage links the spot price to the forward price, and how carry costs and benefits shift that link. Check-yourself items are study aids. Arbitrage and the Law of One Price A forward commitme
DER 5 Pricing and Valuation of Forward Contracts and for an Underlying with Varying Maturities
How a forward is priced at the start, marked to market through its life, settled at expiry, and how forward interest rates are built from the term structure. Check-yourself items are study aids. Price
DER 6 Pricing and Valuation of Futures Contracts
How a futures price is set at inception, why daily settlement makes futures behave differently from forwards, and where the two prices part ways. Check-yourself items are study aids. Futures, Forwards
DER 7 Pricing and Valuation of Interest Rate and Other Swaps
How a swap breaks down into a series of forwards, how the fixed swap rate is set, and how a swap gains or loses value over its life. Check-yourself items are study aids. Swaps as a Series of Forwards
DER 8 Pricing and Valuation of Options
How the price of a European option splits into exercise value and time value, and what moves each part. Check-yourself items are study aids. Exercise Value of an Option An option is a contingent claim
DER 9 Option Replication Using Put-Call Parity
Combining options, the underlying, and a risk-free bond into portfolios that price one another with no arbitrage. Check-yourself items are study aids. Put-Call Parity Earlier lessons treated call and