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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.