- CFA Exams
- 2022 Level I
- Study Session 15. Derivatives
- Reading 46. Basics of Derivative Pricing and Valuation

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##### Learning Outcome Statements PDF Download

1. The Principle of Arbitragea. explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives; | |

2. The Concept of Pricing vs. Valuationb. explain the difference between value and price of forward and futures contracts; | |

3. Pricing and Valuation of Forward Contractsc. 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;
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4. Forward Rate Agreementsf. 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 Contractsh. explain how swap contracts are similar to but different from a series of forward contracts;
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7. The Value of a European Option at Expirationj. explain the exercise value, time value, and moneyness of an option; | |

8. Factors that Affect the Value of an Optionk. identify the factors that determine the value of an option and explain how each factor affects the value of an option; | |

9. Put-Call Parityl. explain put-call parity for European options; | |

10. Put-Call-Forward Paritym. explain put-call-forward parity for European options; | |

11. Binomial Valuation of Optionsn. explain how the value of an option is determined using a one-period binomial model; | |

12. American Option Pricingo. explain under which circumstances the values of European and American options differ. |

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