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Learning Outcome Statements PDF Download
|1. The Meaning of Arbitrage-Free Valuation|
a. explain what is meant by arbitrage-free valuation of a fixed-income instrument;
b. calculate the arbitrage-free value of an option-free, fixed-rate coupon bond;
|2. Interest Rate Trees and Arbitrage-Free Valuation|
c. describe a binomial interest rate tree framework;
|3. Determining the Value of a Bond at a Node|
d. describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node;
f. compare pricing using the zero-coupon yield curve with pricing using an arbitrage-free binomial lattice;
|4. Constructing the Binomial Interest Rate Tree|
e. describe the process of calibrating a binomial interest rate tree to match a specific term structure;
|5. Pathwise Valuation|
g. 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 Method|
h. describe a Monte Carlo forward-rate simulation and its application.