Reading 28

Pricing and Valuation of Forward Commitments

7 modules 35 min
0/7

Exam Focus

This topic review covers the calculation of price and value for forward and future contracts, specifically equity forward contracts, bond forward contracts, and forward (interest) rate agreements. This topic review also covers pricing and valuation of different swaps, including interest rate swaps, equity swaps, and currency swaps. Be able to structure profitable arbitrage transactions should the forward price differs from the no arbitrage price.

There are many formulas in this reading. However, once you realize the fundamental principles of no arbitrage pricing, the formulas will start becoming somewhat less intimidating. There is a lot of testable material from this seven LOS reading!

Modules

  1. Module 28.1Pricing and Valuation ConceptsDescribe the carry arbitrage model without underlying cashflows and with underlying cashflows.9 min · 1 LOS
  2. Module 28.2Pricing and Valuation of Equity ForwardsDescribe how equity forwards and futures are priced, and calculate and interpret their no arbitrage value.3 min · 1 LOS
  3. Module 28.3Pricing and Valuation of Fixed Income ForwardsDescribe how fixed income forwards and futures are priced, and calculate and interpret their no arbitrage value.4 min · 1 LOS
  4. Module 28.4Pricing and Valuation of Forward Rate AgreementsDescribe how interest rate forwards and futures are priced, and calculate and interpret their no arbitrage value.9 min · 1 LOS
  5. Module 28.5Pricing and Valuation of Interest Rate SwapsDescribe how interest rate swaps are priced, and calculate and interpret their no arbitrage value.4 min · 1 LOS
  6. Module 28.6Currency SwapsDescribe how currency swaps are priced, and calculate and interpret their no arbitrage value.4 min · 1 LOS
  7. Module 28.7Equity SwapsDescribe how equity swaps are priced, and calculate and interpret their no arbitrage value.2 min · 1 LOS
Practice quiz16 questions on this reading