- CFA Exams
- Level II 2021
- Study Session 12. Fixed Income (1)
- Reading 33. The Arbitrage-Free Valuation Framework

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##### Learning Outcome Statements PDF Download

1. The Meaning of Arbitrage-Free Valuationa. explain what is meant by arbitrage-free valuation of a fixed-income instrument;
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2. Interest Rate Trees and Arbitrage-Free Valuationc. describe a binomial interest rate tree framework; | |

3. Determining the Value of a Bond at a Noded. describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node;
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4. Constructing the Binomial Interest Rate Treee. describe the process of calibrating a binomial interest rate tree to match a specific term structure; | |

5. Pathwise Valuationg. 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; | |

6. Monte Carlo Methodh. describe a Monte Carlo forward-rate simulation and its application. |

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