Pricing and Valuation of Forward Commitments (2024 Level II CFA® Exam -Derivatives-Module 1)

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Topic 7- Derivatives
Module 1 - Pricing and Valuation of Forward Commitments
0:00 Introduction and Learning Outcome Statements
6:55 LOS: Describe the carry arbitrage model without underlying cashflows and with underlying cashflows.
22:16 LOS: Describe how equity forwards and futures are priced and calculate and interpret their no-arbitrage value.
31:32 LOS: Describe how interest rate forwards and futures are priced and calculate and interpret their no-arbitrage value.
43:49 LOS: Describe how fixed-income forwards and futures are priced and calculate and interpret their no-arbitrage value.
49:40 LOS: Describe how interest rate swaps are priced and calculate and interpret their no-arbitrage value.
1:01:33 LOS: Describe how currency swaps are priced and calculate and interpret their no-arbitrage value.
1:04:15 LOS: Describe how equity swaps are priced and calculate and interpret their no-arbitrage value.

[@tejasvibrar1022]

Thank you so much for all your videos Prof! Do you know when Reading 35/Alternative Investments videos will be posted?

[@naman9696]

shouldn't you use 115 in the example @ 19:00

[@danielwahome101]

Had a similar thought.

[@jonathansouza7102]

very good! thanks

[@scottmorrison474]

At 21:00 believe the calculation is being done as if the forward prices 130 and 132 are underlying prices. The way I read the question, I am instead taking the $2 difference at time T and discounting to time t. I ended up with 1.94 as my value of the long position

[@ASMRGEMSTON]

1:03:49 missing a [ in formula very helpful video, helps me a lot! thanks

[@anthonyikedakolar9375]

Thank you Professor!

[@analystprep]

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[@MuhammadAli-ym4oq]

At 45.25 the question states spot price 100 whereas taken as 110 in the solution for computation of FP

[@AmirTaghaboni]

Can you expand on Jibor a bit more please?

[@giovanniberardi4134]

interest rate swaps: is the swap rate the same as the par yield?

[@abdullahnarejo1259]

how do you determine the floating party going to lose!

[@abdullahnarejo1259]

sir why is you annualizing the fix swap rate is not it annualized in DF?

[@LordDockerton]

DF is the actual change in value used for computation. Annualizing is a notation convention

[@tejasvibrar1022]

I believe the counterparties are reversed @ 34:35, won't a fixed receiver benefit when the market price is below the forward price?

[@jingjingli3910]

Agreed

[@henricamayo3160]

Hardest module in the curriculum

[@7jcjg]

@45:32, why do we calculate future price as time=120 instead of t=200 which is the expiry date of the contract? its just a change in time thing, so the answer can be found by adjusting the time value of the result, but on a test this would have to be clearly stated what future time we are pricing at... why would we price at t=120 when that is neither today's date to PV the price, or the contract date t=200 when the contract expires.

[@castafinance]

34:51 your slide is wrong

[@gordonjai906]

which part is wrong?

[@7jcjg]

@1:03:03 would be useful to know where the 0.8163 came from to convert USD to EUR notional, given the calculation is shown nowhere and the spot exchange rate was never given...

[@erickstanza8782]

The wording of the question is poor at 19mins. You refer to the “contract” when you should actually be saying “the underlying”

[@erickstanza8782]

You keep switching between futures and forwards. Wrong. You keep referring to the contract price instead of the spot price. Wrong. It’s infuriating having to correct you all the time.