- CFA Level 2: Derivatives Part 2 – Introduction
- Introduction to Options
- Synthetic Options and Rationale
- One Period Binomial Option Pricing Model
- Call Option Price Formula
- Binomial Interest Rate Options Pricing
- Black-Scholes-Merton (BSM) Option Pricing Model
- Black-Scholes-Merton Model and the Greeks
- Dynamic Delta Hedging & Gamma Related Issues
- Estimating Volatility for Option Pricing
- Put-Call Parity for Options on Forwards
- Introduction to Swaps
- Plain Vanilla Interest Rate Swap
- Equity Swaps
- Currency Swaps
- Swap Pricing vs. Swap Valuing
- Pricing and Valuing a Plain Vanilla Interest Rate Swap
- Pricing and Valuing Currency Swaps
- Pricing and Valuing Equity Swaps
- Swaps as Theoretical Equivalents of Other Derivatives
- Swaptions and their Valuation
- Swap Credit Risk and Swap Spread
- Interest Rate Derivatives - Caps and Floors
- Credit Default Swaps (CDS)
- Credit Derivative Trading Strategies
Swaps as Theoretical Equivalents of Other Derivatives
Interest Rate Swaps as a Series of Forward Rate Agreements
An interest rate swap can be recreated by a series of forward rate agreements (FRAs).
A difference between an interest rate swap and a series of FRAs is that the swap will have a single fixed rate, but the forward contracts will be priced at different interest rates based on the slope of the yield curve (unless, of course the yield curve is flat, then a single rate would hold for the series of FRAs).
A plain vanilla interest rate swap can be viewed as a combination of long and short positions in interest rate futures contracts, where each futures contract would have successive maturity dates.
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