2025 CFA© Program Curriculum Level I Volume 7 - DERIVATIVES

✍ Scribed by CFA Institute

• Publisher: CFA Institute
• Year: 2025
• Leaves: 247
• Edition: 2025
• Category: Library

✦ Table of Contents

How to Use the CFA Program Curriculum
CFA Institute Learning Ecosystem (LES)
Designing Your Personal Study Program
Errata
Other Feedback
Derivatives
Learning Module 1 Derivative Instrument and Derivative Market Features
Introduction
Derivative Features
Definition and Features of a Derivative
Derivative Underlyings
Equities
Fixed-Income Instruments
Currencies
Commodities
Credit
Other
Investor Scenarios
Derivative Markets
Over-the-Counter (OTC) Derivative Markets
Exchange-Traded Derivative (ETD) Markets
Central Clearing
Investor Scenarios
Practice Problems
Solutions
Learning Module 2 Forward Commitment and Contingent Claim Features and Instruments
Introduction
Forwards, Futures, and Swaps
Futures
Swaps
Options
Scenario 1: Transact (ST > X)
Scenario 2: Do Not Transact (ST < X)
Credit Derivatives
Forward Commitments vs. Contingent Claims
Practice Problems
Solutions
Learning Module 3 Derivative Benefits, Risks, and Issuer and Investor Uses
Introduction
Derivative Benefits
Derivative Risks
Issuer Use of Derivatives
Investor Use of Derivatives
Practice Problems
Solutions
Learning Module 4 Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives
Introduction
Arbitrage
Replication
Costs and Benefits Associated with Owning the Underlying
Learning Module 5 Pricing and Valuation of Forward Contracts and for an Underlying with Varying Maturities
Introduction
Pricing and Valuation of Forward Contracts
Pricing versus Valuation of Forward Contracts
Pricing and Valuation of Interest Rate Forward Contracts
Interest Rate Forward Contracts
Practice Problems
Solutions
Learning Module 6 Pricing and Valuation of Futures Contracts
Introduction
Pricing of Futures Contracts at Inception
MTM Valuation: Forwards versus Futures
Interest Rate Futures versus Forward Contracts
Forward and Futures Price Differences
Interest Rate Forward and Futures Price Differences
Effect of Central Clearing of OTC Derivatives
Practice Problems
Solutions
Learning Module 7 Pricing and Valuation of Interest Rates and Other Swaps
Introduction
Swaps vs. Forwards
Swap Values and Prices
Practice Problems
Solutions
Learning Module 8 Pricing and Valuation of Options
Introduction
Option Value relative to the Underlying Spot Price
Option Exercise Value
Option Moneyness
Option Time Value
Arbitrage
Replication
Factors Affecting Option Value
Value of the Underlying
Exercise Price
Time to Expiration
Risk-Free Interest Rate
Volatility of the Underlying
Income or Cost Related to Owning Underlying Asset
Practice Problems
Solutions
Learning Module 9 Option Replication Using Put–Call Parity
Introduction
Put–Call Parity
Option Strategies Based on Put–Call Parity
Put–Call Forward Parity and Option Applications
Put–Call Forward Parity
Option Put–Call Parity Applications: Firm Value
Practice Problems
Solutions
Learning Module 10 Valuing a Derivative Using a One-Period Binomial Model
Introduction
Binomial Valuation
The Binomial Model
Pricing a European Call Option
Risk Neutrality
Practice Problems
Solutions
Glossary