Valuing Embedded Options
According to the arbitrage-free framework, the value of a bond with embedded options... Read More
Reading 37: Pricing and Valuation of Forward Commitments
-c. Describe and compare how the interest rate, currency, and equity swaps are priced and valued;
–d Calculate and interpret the no-arbitrage value of interest rate, currency, and equity swaps.
Reading 38: Valuation of Contingent Claims
–a. Describe and interpret the binomial option valuation model and its component terms;
-c. Identify an arbitrage opportunity involving options and describe the related arbitrage;
-d. Calculate and interpret the value of an interest rate option using a two-period binomial model;
-f. Assumptions of the Black-Scholes-Merton Option Valuation Model;
-i. Describe how the Black model is used to value European options on futures;
-j. Describe how the Black model is used to value European interest rate options and European swaptions;
-k. Interpret each of the option Greeks;
-l. Describe how a delta hedge is executed;
-m. Describe the role of gamma risk in options trading;
-n. Define implied volatility and explain how it is used in options trading.
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