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Learning Outcome Statements PDF Download
|1. The Principle of Arbitrage|
a. explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
|2. The Concept of Pricing vs. Valuation|
b. explain the difference between value and price of forward and futures contracts;
|3. Pricing and Valuation of Forward Contracts|
c. calculate a forward price of an asset with zero, positive, or negative net cost of carry;
d. explain how the value and price of a forward contract are determined at expiration, during the life of the contract, and at initiation;
e. describe monetary and nonmonetary benefits and costs associated with holding the underlying asset and explain how they affect the value and price of a forward contract;
|4. Forward Rate Agreements|
f. define a forward rate agreement and describe its uses;
|5. Why do Forward and Futures Prices Differ?|
g. explain why forward and futures prices differ;
|6. Pricing and Valuation of Swap Contracts|
h. explain how swap contracts are similar to but different from a series of forward contracts;
i. distinguish between the value and price of swaps;
|7. The Value of a European Option at Expiration|
j. explain the exercise value, time value, and moneyness of an option;
|8. Factors that Affect the Value of an Option|
k. identify the factors that determine the value of an option and explain how each factor affects the value of an option;
|9. Put-Call Parity|
l. explain put-call parity for European options;
|10. Put-Call-Forward Parity|
m. explain put-call-forward parity for European options;
|11. Binomial Valuation of Options|
n. explain how the value of an option is determined using a one-period binomial model;
|12. American Option Pricing|
o. explain under which circumstances the values of European and American options differ.
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