CFA Level 1 – Derivatives

Derivatives are financial instruments that derive their value from the performance of an underlying asset, such as a stock, bond, commodity, currency, or interest rate. Derivatives can be used for hedging, speculation, or arbitrage purposes. In this course, you will learn about the types, characteristics, pricing, and valuation of different derivative instruments, such as forwards, futures, options, swaps, and credit derivatives. You will also learn about the benefits and risks of using derivatives, as well as the role of arbitrage in determining prices and promoting market efficiency.

This course is designed to prepare you for the CFA Level 1 exam on derivatives. The course covers the following topics:

• Derivative Markets and Instruments: You will learn how to define a derivative and distinguish between exchange-traded and over-the-counter derivatives. You will also learn how to contrast forward commitments with contingent claims and describe the purposes and controversies of derivative markets.
• Basics of Derivative Pricing and Valuation: You will learn how to use the concepts of arbitrage, replication, and risk neutrality to price derivatives. You will also learn how to calculate and value forward contracts, futures contracts, swaps, options, and credit derivatives. You will also learn how to apply put-call parity and the binomial model to value options.
• Risk Management Applications of Option Strategies: You will learn how to determine the value at expiration, profit, maximum profit, maximum loss, breakeven price, and payoff graph of various option strategies. You will also learn how to use covered calls and protective puts for risk management purposes.

The course is based on the CFA Level 1 syllabus for derivatives. The course includes lectures, readings, quizzes, and practice questions to help you master the concepts and prepare for the exam. By the end of this course, you will have a solid understanding of derivatives and how they work in the financial markets.