Derivatives and Alternative Investments Vol 6

How to Use the CFA Program Curriculum

 

Curriculum Development Process Organization of the Curriculum Features of the Curriculum Designing Your Personal Study Program Feedback

Derivatives

 

Derivative Markets and Instruments

 

Introduction

 

Derivatives: Definitions and Uses The Structure of Derivative Markets

 

Exchange-Traded Derivatives Markets Over-the-Counter Derivatives Markets Types of Derivatives

 

Forward Commitments Contingent Claims Hybrids

 

Derivatives Underlyings The Purposes and Benefits of Derivatives

 

Risk Allocation, Transfer, and Management Information Discovery Operational Advantages Market Efficiency

 

Criticisms and Misuses of Derivatives Speculation and Gambling Destabilization and Systemic Risk Elementary Principles of Derivative Pricing Storage Arbitrage Summary Practice Problems Solutions

 

Reading 59 Basics of Derivative Pricing and Valuation

 

introduction

 

Fundamental Concepts of Derivative Pricing Basic Derivative Concepts Pricing the Underlying The Principle of Arbitrage The Concept of Pricing vs, Valuation

Pricing and Valuation of Forward Commitments 73

 

Pricing and Valuation of Forward Contracts 73

 

Pricing and Valuation of Futures Contracts 80

 

Pricing and Valuation of Swap Contracts . 82

 

Pricing and Valuation of Options 85

 

European Option Pricing 85

 

Binomial Valuation of Options 100

 

American Option Pricing 104

 

Summary ' 107

 

Practice Problems 109

 

Solutions 114

 

Reading 60 Risk Management Applications of Option Strategies 119

 

Introduction ' . 119

 

Option Strategies for Equity Portfolios 120

 

Standard Long and Short Positions 123

 

Risk Management Strategies with Options and the Underlying 130

 

Summary 136

 

Practice Problems 138

 

Solutions 141

%iipv '\Mive Irsveslmesiis

.u 3’, ks-,a.. 15 «lit r.utwu ur eilttvenib 147

 

,.--ас5;. ùiUudut.io.j u Alternative Investments 149

 

Introduction 149

 

Alternative investments 150

 

Categories of Alternative Investments 154

 

Returns to Alternative Investments 155

 

Portfolio Context: Integration of Alternative Investments with

 

Traditional Investments 157

 

investment Structures 158

 

Hedge Funds 158

 

Hedge Fund Strategies 162

 

Hedge Funds and Diversification Benefits 165

 

Hedge Fund Fees and Other Considerations 166

 

Hedge Fund Valuation Issues 172

 

Due Diligence for Investing in Hedge Funds 173

 

Private Equity 175

 

Private Equity Structure and fees 176

 

Private Equity Strategies 177

 

Private Equity: Diversification Benefits, Performance, and Risk 181

 

Portfolio Company Valuation 183

 

Private Equity: Investment Considerations and Due Diligence 184

 

Real Estate ' 184

 

Forms of Real Estate Investment 186

 

Real Estate Investment Categories " 187

 

Rea! Estate Performance and Diversification Benefits