Derivatives Fundamentals Class

Forward contracts are the most basic financial derivative and are a central key to understand financial derivatives.

Futures are the exchange traded equivalent of forwards. Futures contracts are highly standardized and cleared through a central counterparty.

Without the ability to finance long and short positions there would be no liquid markets. This is especially true for the derivatives markets. Without financing there is no arbitrage and without arbitrage the price structure between spot, forwards and options disintegrates.

The forward price is the price agreed today for delivery of the underlying at a future point in time. But what defines the forward price? Are market makers free to set the forward price they want, or is it defined by market forces?

In this module we explain what total return swaps are, how they are used, priced and hedged. We end the module with a map of all instruments with the same risk as the underlying.

In this session we formally introduce you to options and explain all the related jargon. The module lays the foundation on which we can then expand in the subsequent modules.

Moneyness, volatility and time are the key factors that drive the value of an option. This module will simplify and straighten your thinking about options.

Option models don’t need to be black boxes. The main principles and assumptions behind a model are often relatively simple. After working through this module, you have a better understanding of what option models do, how they work and how to use them.

Put call-parity is the most important relationship between European call and put options. It has far reaching consequences not only for European options.

Option strategies are combination of multiple option contracts, tailored to capture a specific investment view. This module introduces the major option strategies and how investors use them.

A trader’s profit and an investor’s expected return are endangered when market conditions change. Risk measures quantify the amount of risk caused by changes in market conditions.