Derivatives Pricing – Learning Roadmap

A derivative product is a financial instrument whose value is determined completely by external variables. The external factor, or the underlying, could be anything but in general is either a financial asset or an economic variable (such as interest rates).

Derivative instruments include forward and futures contracts, vanilla and exotic options, and swaps. These instruments may be priced or valued in a number of ways. Options for example may be valued using closed form solutions (like the Black-Scholes option pricing formula) or Monte Carlo Simulators or Binomial Trees.

What are the prerequisites?

Key concepts and terminology associated with Derivatives

As a first step in learning about Derivatives Pricing we begin by familiarizing ourselves with the related terminology. The following courses will help you grasp and get comfortable with the key concepts behind the derivatives language.

  • Derivatives Crash Course for Dummies
  • Derivative Pricing Equation Reference
  • Derivative Products
  • Advance Derivatives Crash Course

What topics are covered?

Calculation tools for pricing derivatives

We start off with developing a better understanding of the Black Scholes equation before moving to pricing with Binomial trees and Monte Carlo Simulation. Pricing means determining the present value of the expected value of instrument on the valuation date. For this purpose therefore we also review interest rate modeling. These topics are covered in the following courses:

  • Understanding N(d1) and N(d2)
  • Building Monte Carlo Simulators in Excel
  • Option Pricing with Binomial Trees in Excel Spreadsheets
  • Interest Rate Simulation Crash Course

Derivative instruments I will learn to price

We then move on to pricing specific derivative instruments:

  • Pricing Interest Rate Swaps
  • Interest Rate Options – Pricing Caps and Floors

Related Video Courses

  • Understanding N(d1) and N(d2)
  • Option Pricing using Monte Carlo Simulation

Related PDF Fles

  • Derivatives Terminology Crash Course
  • Derivative Products
  • Derivatives Pricing- Binomial Trees- The Efficient Approach
  • Pricing IRS –Term Structures
  • Pricing IRS- IRS & CCS
  • Pricing Interest Rate Options
  • How to construct a Black Derman Toy Model in EXCEL
  • How to utilize results of a Black Derman Toy Model
  • Interest Rate Simulation Crash Course

Related EXCEL Files

  • Derivative Pricing – Binomial Trees
  • Pricing IRS – Module I – Term Structures
  • Pricing IRS – Module II – IRS and CCS
  • Pricing Interest Rate Options – Module III
  • Monte Carlo Simulation – Commodity
  • Monte Carlo Simulation – Currency
  • Monte Carlo Simulation – Equity
  • Valuing Options – Black Scholes
  • Valuing Options – Binomial Tree – Traditional Approach
  • Calibration of the CIR Model Example
  • Black Derman Toy Model Construction – EXCEL Example
  • How to utilize the results of a Black Derman Toy Model –EXCEL Example
  • Heath Jarrow Merton – HJM 3 – Factor Interest Rate Model
  • Principal Component Analysis – PCA – US Treasury Yield Rates


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