- CFA Exams
- 2025 Level II
- Topic 6. Fixed Income
- Learning Module 27. The Arbitrage-Free Valuation Framework
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Learning Outcome Statements PDF Download
| 1. Arbitrage-Free Valuation for an Option-Free Bond explain what is meant by arbitrage-free valuation of a fixed-income instrument; calculate the arbitrage-free value of an option-free, fixed-rate coupon bond; | |
| 2. The Basics of Creating a Binomial Interest Rate Tree describe a binomial interest rate tree framework; | |
| 3. Valuing an Option-Free Bond with a Binomial Tree describe the process of calibrating a binomial interest rate tree to match a specific term structure; describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node; compare pricing using the zero-coupon yield curve with pricing using an arbitrage-free binomial lattice; | |
| 4. Pathwise Valuation describe pathwise valuation in a binomial interest rate framework and calculate the value of a fixed income instrument given its cash flows along each path; | |
| 5. The Monte Carlo Method describe a Monte Carlo forward-rate simulation and its application. | |
| 6. Term Structure Models describe term structure models and how they are used. |
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