Module 40.2: Put-Call Parity
We can value a put option using put call parity. Put-call parity states that the value of a fiduciary call …
derivatives
Module 40.7 LOS 40.m: Role of Gamma Risk in the BSM model
The BSM model predicts that changes in stock price is happens continuously, not abruptly. If this were the case, there …
Module 41.2 LOS 41.c: Characteristics of a covered call
By taking on a long position in a stock and combining it with a short call we create a covered …
Module 39.7 LOS 39.c and 39.d; Module 39.9: Swap fixed rate calculation and calculating the market value of a swap using SFR, pricing an equity swap
In an interest rate swap, a fixed rate is set so that the present value of the floating-rate payments is …
Module 40.6 LOS 40.j: Equivalencies in Interest Rate Derivative Contracts & Swaps
We can use interest rate options to create positions that mimic other contracts. For example, by combining a long interest …
CFA Level II: Derivatives – Option Strategies
A goal of derivative strategies is to modify portfolio risk and return. By combining a bond portfolio with a short …
Module 40.4 & 40.7 LOS 40.k, 40.i: Option Greeks, Synthetic Position, Delta Hedges, Hedge ratio arbitrage
Put-Call Parity and Synthetic Positions Put-call parity is the principle used to generate synthetic longs and shorts. The equation equates …
Module 39.5: Valuing FRAs
Price vs Value of Forward Contracts First we look at the difference between the price of the forward contract and …