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    FRM Essential Formulae

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    Siddhu Sai
    The document provides essential formulas for CFA Level I regarding derivatives and alternative investments. It includes the formulas for calculating the fair price of a forward contract based on the spot price and risk-free rate, put-call parity which relates the price of a call and put option with the same strike price, and the intrinsic value formulas for call and put options based on the relationship between the spot price and strike price.

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    FRM Essential Formulae

    Uploaded by

    Siddhu Sai
    129 views1 page
    The document provides essential formulas for CFA Level I regarding derivatives and alternative investments. It includes the formulas for calculating the fair price of a forward contract based on the spot price and risk-free rate, put-call parity which relates the price of a call and put option with the same strike price, and the intrinsic value formulas for call and put options based on the relationship between the spot price and strike price.

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    FRM Essential formulaes

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    The document provides essential formulas for CFA Level I regarding derivatives and alternative investments. It includes the formulas for calculating the fair price of a forward contract based on the spot price and risk-free rate, put-call parity which relates the price of a call and put option with the same strike price, and the intrinsic value formulas for call and put options based on the relationship between the spot price and strike price.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    129 views1 page

    FRM Essential Formulae

    Uploaded by

    Siddhu Sai
    The document provides essential formulas for CFA Level I regarding derivatives and alternative investments. It includes the formulas for calculating the fair price of a forward contract based on the spot price and risk-free rate, put-call parity which relates the price of a call and put option with the same strike price, and the intrinsic value formulas for call and put options based on the relationship between the spot price and strike price.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    CFA Level I: Essential Formulas

    STUDY SESSIONS 17 18: DERIVATIVES AND ALTERNATIVE INVESTMENTS

    Study Session 17: Derivatives


    Fair price of a forward: Vt (T) St  F0 (T)
    The forward price is the spot price compounded at the risk free rate over the contracts life:
    F0 (T) S0 (1 r)T
    Value of a forward contract at time t where there is no cost of carry:
    Vt (T) St  (J  R)(1 r)t  F0 (T)(1 r)(T  t)
    Put-call parity: c 

    x
    (l  r)t

    s  p where x = strike price of put and call

    Be prepared to rearrange this formula depending on the inputs given.


    Intrinsic values of options:
    Intrinsic value of call option: cT = Max (0,ST-X)
    Intrinsic value of put option: pT = (Max (0,X-ST)

    21

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