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CFA Level 1 (2019) - Financial Derivatives

Name: CFA Level 1 (2019) - Financial Derivatives
Rating: 4.1 (27 reviews)

The Course is structured to help students preparing for CFA level 1 Exams

Created byCFINACC Trusted Mentor in the Field of Finance & Accounting

Last updated 3/2019

English

What you'll learn

Derivative Markets and Instruments, forwards, futures, swap and options. This course will help prepare for CFA Level 1 exam.

Course content

6 sections • 53 lectures • 4h 5m total length

What is a Derivative Contract ?2:04
Important Note" Since it is difficult for students with limited knowledge about derivatives to understand the definition, I have begun the course with few real life situations and then linked situation with the definition. Hence, I will advise you to watch the videos in the manner that they are listed (follow the sequence) as later videos in this section contain examples explained in the earlier videos.

Explains the purpose of derivative contracts/ instruments
Describes the term "hedging"
Covers LOS 56.d " Describe purpose of, and controversies related to, derivative markets.
Derivatives & Risk Management1:47
Explains the basic structure of a Derivative instrument and how it is used to hedge against market risks
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Long, Short & Underlying Asset1:32
Describes "Long", "short" and "Underlying", with the help of examples
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Contract Execution4:19
This video explains
Contract Execution
Gain/Loss
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Physical Delivery vs Cash Settlement3:53
This lecture explains the difference between the cash settlement and physical settlement. The purpose here is to help students understand that outcome under both the contracts will be same.
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Definition2:02
Explains the Definition of derivatives instruments by linking definition to the situation explained in the earlier videos.
Covers LOS 56.a: Define a derivative and distinguish between exchange- traded and over- the- counter derivatives;
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics

Types of Financial Derivatives2:42
This video explains
The types of derivative contracts
Difference between forward commitments & contingent claims
Difference and Similarity between Forward, Futures & Swaps

Covers
LOS 56.a: Define a derivative and distinguish between exchange- traded and over- the- counter derivatives;
LOS 56.b Contrast forward commitments with contingent claims;
LOS 56.c Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Forward Contracts on Equity Share (Optional)1:00
Explains the structure of a Forward instrument with equity share as an underlying asset. If you want to learn about the Equity share and stock, kindly watch the video "Financial instruments" in the "Additional Resources" section.
Currency Forward Contracts (Optional)3:17
Explains the structure of a Forward instrument with Exchange rate as an underlying asset.
Forward Rate Agreement (FRA)3:02
This video explains the structure of a Forward instrument with Interest rate Benchmark rate as an underlying asset called Forward Rate Agreement (FRA)
FRA is covered in detail in a later video
Covers LOS 57.E: Define a forward rate agreement and describe its uses;
Contract Termination (Optional)9:08
Margins & Mark to Market5:32
This video explains "Initial Margin", "Maintenance Margin" and "Mark to Market"
Covers LOS 56.c Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Hedging Through Futures5:04
Comprehensive example to explain how businesses use Futures Contracts for hedging
Covers LOS 56.c Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;
Exchange vs OTC5:16
Describes Characteristics of the two markets: Exchange and Over the Counter market
Covers LOS 56. A: define a derivative and distinguish between exchange- traded and over- the- counter derivatives;

Call Option5:00
Explains the Structure of a Call Option
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics
Covers LOS 57.I: Explain how the value of a European option is determined at expiration;
Call Option Buyer - Payoff & Profit4:03
Covers LOS 57.I: Explain how the value of a European option is determined at expiration;
Call Writer Payoff and Profit3:45
Covers LOS 57.I: Explain how the value of a European option is determined at expiration;
Put Option4:09
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics
Covers LOS 57.I: Explain how the value of a European option is determined at expiration;
Put Buyer - Payoff & Profit3:49
Covers LOS 57.I: Explain how the value of a European option is determined at expiration;
Put Writer - Payoff & Profit2:55
Covers LOS 57.I: Explain how the value of a European option is determined at expiration;
Moneyness2:01
Explains Three Forms of Moneyness
Covers LOS 57.J: Explain the exercise value, time value, and moneyness of an option;
Payoff & Profit Graph - Call option buyer (Optional)1:38
Payoff & Profit Graph - Call option writer (Optional)0:56
Payoff & Profit Graphs - Put Option Buyer and Writer (Optional)2:11
Option Value2:57
Covers LOS 57.J: Explain the exercise value, time value, and moneyness of an option;
Covers LOS 57.K: Identify the factors that determine the value of an option and explain how each factor affects the value of an option;
Option Value Drivers19:34
Explains the drivers which are important is determining the value of options
Covers LOS 57.K: Identify the factors that determine the value of an option and explain how each factor affects the value of an option;
Put - Call Parity9:34
Describes two strategies " Protective put" and "fiduciary call"
LOS 57.L: Explain put–call parity for European options;
Put - Call Forward Parity3:49
The concept explained in this video is linked to the previous lecture titled " Put-Call Forward Parity".
Covers LOS 57.M: Explain put–call–forward parity for European options;
Binomial Model (call)6:30
Describes how to calculate the value of a call option using a one-period Binomial model.
Covers LOS 57.N: Explain how the value of an option is determined using a one-period binomial model;
Binomial Model (put)1:55
Describes how to calculate the value of a put option using a one-period Binomial Model.
Covers LOS 57.N: Explain how the value of an option is determined using a one-period binomial model;
Value of American vs European Options2:46
Before you watch this video I will recommend you to watch video titled "Dividend payment & share price" in the additional resources section.
Covers LOS 57.O:Explain under which circumstances the values of European and American options differ.
Credit Default Swaps (CDS)1:59
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics

Arbitrage5:19
Introductory Lecture on Arbitrage.
Covers LOS 56.E: Explain arbitrage and the role it plays in determining prices and promoting market efficiency.
Pricing the underlying6:10
To understand the pricing, student is required to have a good understanding of the "Time Value of Money" concept. It is highly recommended to review the lectures titled " Time Value of Money" and "Discounting vs Compounding" in the "Additional resources" section.
In this video you will learn about the types of investors "Risk Averse and Risk-Neutral" and their required rate of return.
Covers LOS 57.A: Explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
No-Arbitrage Pricing Part 13:55
This lecture describes the formula used to calculate Forward or Futures Price. To understand this topic, student needs to have a good understanding about the "Time Value of Money " Concept. Therefore, I recommend you watch Lecture " Pricing the underlying" before you watch this video. And the contents in the two videos "Time value of Money" and "discounting vs compounding " in the "Additional Resources" section are also related and relevant to this topic.
Covers LOS 57.A: Explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
No-Arbitrage Pricing Part 23:05
This video explains that use of risk-free rate as the required rate of return will result in No-arbitrage price.
Covers LOS 57.A: Explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
No-Arbitrage Pricing Part 35:08
Describes that why price of forward and futures contracts are calculated from the perspective of risk-neutral investor. Or in the other words, why risk-free rate is used to calculate Forward and Futures price.
It is recommended to watch the Lecture titled "Short selling" in the additional resources section.
Covers LOS 57.A: Explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
No-Arbitrage Pricing Part 47:18
Explains that how an investor can make arbitrage when Price of forward and futures contract are not No-Arbitrage price (or mispriced)
Covers LOS 57.A: Explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
Arbitrage & Replication3:17
To understand this lecture, student needs to have a good understanding of Arbitrage and No-Arbitrage pricing.
Concepts explained in the lecture titled " No -Arbitrage Pricing" are related to this lecture.
Covers LOS 57.A: Explain how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives;
Benfits & Costs of Holding Assets2:15
This lecture describes various benefits and costs attached to underling assets. The material introduced in this video will help students understand lectures titled "Cost of Carry & Pricing" and "Cost of Carry & Value" listed in this section.
Covers LOS 57.D: Describe monetary and nonmonetary benefits and costs associated with holding the underlying asset and explain how they affect the value and price of a forward contract;
Price vs Value2:10
Describes the difference between Price and Value of a Forward Instrument
Covers LOS 57.B: Distinguish between value and price of forward and futures contracts;
Value During the life of the contract7:59
Covers LOS 57.C: Explain how the value and price of a forward contract are determined at expiration, during the life of the contract, and at initiation;
Cost of Carry & Pricing7:11
The content explained in this video is linked to the lecture titled "Benefits & Costs of Holding assets"
Covers LOS 57.D: Describe monetary and nonmonetary benefits and costs associated with holding the underlying asset and explain how they affect the value and price of a forward contract;
Cost of Carry & Value4:29
The content explained in this video is linked to the lecture titled "Benefits & Costs of Holding assets" and "Cost of Carry & Pricing"
Covers LOS 57.D: Describe monetary and nonmonetary benefits and costs associated with holding the underlying asset and explain how they affect the value and price of a forward contract;
Forward Price vs Futures Price9:20
Covers LOS 57.F: Explain why forward and futures prices differ;
FRA Application & Synthetic FRA8:40
The content explained in this lecture is linked to the lecture titled "Forward Rate Agreements" in the Forward & Futures Section
Covers LOS 57.E: Define a forward rate agreement and describe its uses;

Swaps8:28
This video explains the structure of Interest Rate swap
Covers LOS 56 c: Define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics
Covers LOS 57.G: Explain how swap contracts are similar to but different from a series of forward contracts;
Swap Price vs Value5:11
To understand SWAP pricing, students need to have a knowledge about the" Time value of Money" and "Forward Rate Agreements (FRAs)". Kindly watch FRA lectures and lectures on the "Time Value of Money" and "Discounting vs Compounding" in the "Additional Resources" Section
This video explains the Price and Value of Interest Rate Swap
Covers LOS 57.H: Distinguish between the value and price of swaps;

Requirements

Basic Mathematics and Fundamentals of Finance. However, this course includes video lectures of relevant prerequisite topics related to Fundamentals of finance in the "Additional Resources" section

Description

What you will learn?

Types of Derivative Instruments and markets
Definitions and terminologies
Pricing and Valuation of derivative Instruments
Various factors affecting price and valuation of derivative instruments
Include all major topics covered in Reading 56 & 57, especially Arbitrage, No-Arbitrage Pricing, Option Value Drivers, Put-Call parity, SWAP valuation, FRAs.

Requirements

None

Description

If you are a beginner and don’t know much about Financial Derivatives. Then you have come to the right place as I have covered all the concepts from scratch.

Why you should take this course? What value it will add?

Let me first discuss some problems and issues that students encounter when they study Financial derivatives.

First, Financial derivatives is one of the complexed courses in Finance, as the students need to have a strong knowledge about fundamentals of Finance to understand the pricing and valuation of financial derivatives instruments.
Second, one concept leads to another, so students find it difficult to understand linkages between various interlinked concepts.
Third, many of the concepts covered in Financial derivatives are difficult to relate to real life examples as compared to the other subjects in Finance such as Corporate Finance or Financial Reporting and Analysis.

I have tried to address the above mentioned issues

By adding complementary lectures to explain fundamentals of finance which are relevant to the topics covered in the Financial derivatives
I have divided the concepts into various parts and explained each part separately and also how all components are related to one another
I have included examples and focused on relating a concept to a situation. This will help students to visualize, which in turn help them to retain the concepts
Used plain language

This course is divided into five sections

Introduction
Forward & Futures
Options
Pricing and Valuation of Forward
Swaps

I will advise you to watch the videos in the manner that they are listed as videos in the later sections contain examples explained in the earlier videos. By the end of his course you will be able to understand all major concepts covered in Reading 56 & 57

Who this course is for

This course is for CFA Level 1 Candidates
This course is for students who are interested in studying Financial derivatives at University level programs

Required Disclaimer: CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by CFINACC or Udemy. CFA institute, CFA® and the Chartered Financial Analyst® are trademarks owned by CFA Institute.

Who this course is for:

Finance students
CFA Students

CFA Level 1 (2019) - Financial Derivatives

What you'll learn

Explore related topics

Course content

Introduction6 lectures • 16min

Forward & Futures8 lectures • 35min

Options18 lectures • 1hr 20min

Pricing & Valuation of Forwards & Futures14 lectures • 1hr 16min

SWAPS2 lectures • 14min

Additional Resources5 lectures • 25min

Requirements

Description

Who this course is for: