Limited Time Offer: Save 10% on all 2021 and 2022 Premium Study Packages with promo code: BLOG10    Select your Premium Package »

Study Notes for CFA® Level II – Derivatives – offered by AnalystPrep

Study Notes for CFA® Level II – Derivatives – offered by AnalystPrep

Reading 33: Pricing and Valuation of Forward Commitments

a. Describe the carry arbitrage model without underlying cashflows and with underlying cashflows;

-b. Describe how equity forwards and futures are priced, and calculate and interpret their no-arbitrage value;

-c. Describe how interest rate forwards and futures are priced, and calculate and interpret their no-arbitrage value;

-d. Describe how fixed-income forwards and futures are priced, and calculate and interpret their no-arbitrage value;

-e. Describe how interest rate swaps are priced, and calculate and interpret their no- arbitrage value;

-f. Describe how currency swaps are priced, and calculate and interpret their no- arbitrage value;

-g. Describe how equity swaps are priced, and calculate and interpret their no- arbitrage value.

Reading 34: Valuation of Contingent Claims

-a. Describe and interpret the binomial option valuation model and its component terms;

-b. Calculate the no-arbitrage values of European and American options using a two-period binomial model;

-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;

-e. Describe how the value of a European option can be analyzed as the present value of the option’s expected payoff at expiration;

-f. Identify assumptions of the Black–Scholes–Merton option valuation model;

-g. Interpret the components of the Black–Scholes–Merton model as applied to call options in terms of a leveraged position in the underlying;

-h. Describe how the Black–Scholes–Merton model is used to value European options on equities and currencies;

-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.

Featured Study with Us
CFA® Exam and FRM® Exam Prep Platform offered by AnalystPrep

Study Platform

Learn with Us

    Subscribe to our newsletter and keep up with the latest and greatest tips for success
    Online Tutoring
    Our videos feature professional educators presenting in-depth explanations of all topics introduced in the curriculum.

    Video Lessons



    Daniel Glyn
    Daniel Glyn
    2021-03-24
    I have finished my FRM1 thanks to AnalystPrep. And now using AnalystPrep for my FRM2 preparation. Professor Forjan is brilliant. He gives such good explanations and analogies. And more than anything makes learning fun. A big thank you to Analystprep and Professor Forjan. 5 stars all the way!
    michael walshe
    michael walshe
    2021-03-18
    Professor James' videos are excellent for understanding the underlying theories behind financial engineering / financial analysis. The AnalystPrep videos were better than any of the others that I searched through on YouTube for providing a clear explanation of some concepts, such as Portfolio theory, CAPM, and Arbitrage Pricing theory. Watching these cleared up many of the unclarities I had in my head. Highly recommended.
    Nyka Smith
    Nyka Smith
    2021-02-18
    Every concept is very well explained by Nilay Arun. kudos to you man!
    Badr Moubile
    Badr Moubile
    2021-02-13
    Very helpfull!
    Agustin Olcese
    Agustin Olcese
    2021-01-27
    Excellent explantions, very clear!
    Jaak Jay
    Jaak Jay
    2021-01-14
    Awesome content, kudos to Prof.James Frojan
    sindhushree reddy
    sindhushree reddy
    2021-01-07
    Crisp and short ppt of Frm chapters and great explanation with examples.