Chapter 8: Pricing and Valuation of Forwards and Futures

In this section

• Valuation of Forward Contracts at Initiation, During the Life, and at Expiry
  Valuation of Forward Contracts at Initiation, During the Life, and at Expiry (CFA Level 1): Forward Contracts: Fundamentals Refresher, Valuation at Initiation, and Intuition. Key definitions, formulas, and exam tips.
• Determining Forward Prices for Various Underlyings
  Determining Forward Prices for Various Underlyings (CFA Level 1): Cost-of-Carry Basics, Adjustments for Dividends, and Storage Costs and Convenience Yields for Commodities. Key definitions, formulas, and exam tips.
• Relationship between Spot, Forward, and Futures Prices
  Relationship between Spot, Forward, and Futures Prices (CFA Level 1): No-Arbitrage Foundation, Spot Price vs. Forward Price: The Basic Connection, and Futures: The Twist of Mark-to-Market. Key definitions, formulas, and exam tips.
• Impact of Storage Costs and Convenience Yields
  Impact of Storage Costs and Convenience Yields (CFA Level 1): Understanding Storage Costs, Key Points About Storage Costs, and Convenience Yield: The Hidden Benefit of Holding the. Key definitions, formulas, and exam tips.
• Convergence and Delivery
  Convergence and Delivery (CFA Level 1): Why Convergence Matters, Theoretical Backbone: No-Arbitrage and Cost of Carry, and Delivery in Physically Settled Contracts. Key definitions, formulas, and exam tips.
• Hedging Strategies Using Forwards and Futures
  Hedging Strategies Using Forwards and Futures (CFA Level 1): Why Hedge?, Key Hedging Concepts, and Short Hedge. Key definitions, formulas, and exam tips.
• Contango, Backwardation, and Term Structure of Futures Prices
  Contango, Backwardation, and Term Structure of Futures Prices (CFA Level 1): Term Structure of Futures Prices, Understanding Contango, and Why Contango Happens. Key definitions, formulas, and exam tips.
• Deliverable vs. Cash-Settled Contracts
  Deliverable vs. Cash-Settled Contracts (CFA Level 1): Fundamental Concepts, Deliverable Contracts, and Cash-Settled Contracts. Key definitions, formulas, and exam tips.
• Term Structure of Interest Rates in Forward Pricing
  Term Structure of Interest Rates in Forward Pricing (CFA Level 1): Key Concepts and Definitions, Relevance of the Yield Curve in Forward Pricing, and Single-Period Forward Pricing. Key definitions, formulas, and exam tips.
• Volatility Index Futures (VIX and Others)
  Volatility Index Futures (VIX and Others) (CFA Level 1): Understanding the VIX, How the VIX Is Constructed, and Contract Specifications and Cash Settlement. Key definitions, formulas, and exam tips.
• Seasonality Adjustments in Commodity Pricing
  Seasonality Adjustments in Commodity Pricing (CFA Level 1): Why Seasonality Matters, Identifying Seasonal Patterns, and Seasonality and the Forwards/Futures Curve. Key definitions, formulas, and exam tips.
• Basis Trading in Commodity Markets
  Basis Trading in Commodity Markets (CFA Level 1): Defining the Basis, Why Basis Matters, and Influences on the Basis. Key definitions, formulas, and exam tips.
• Machine Learning Approaches to Seasonal Commodity Pricing
  Machine Learning Approaches to Seasonal Commodity Pricing (CFA Level 1): Why Use Machine Learning for Seasonal Commodity Pricing and Using Machine Learning to Detect Seasonality. Key definitions, formulas, and exam tips.
• Impact of Circuit Breakers on Derivative Trading
  Impact of Circuit Breakers on Derivative Trading (CFA Level 1): Rationale Behind Circuit Breakers in Derivative Markets, Common Types of Circuit Breakers, and How Circuit Breakers Affect Pricing and Valuation. Clear examples and common exam pitfalls.
• Cross-Exchange Arbitrage Strategies
  Cross-Exchange Arbitrage Strategies (CFA Level 1): Fundamental Concepts in Cross-Exchange Arbitrage, Diagram: Flow of a Basic Cross-Exchange Arbitrage, and High-Frequency Trading and Latency Arbitrage. Key definitions, formulas, and exam tips.
• Zero-Cost Collar Strategies in Commodity Markets
  Zero-Cost Collar Strategies in Commodity Markets (CFA Level 1): Construction of a Zero-Cost Collar, Basic Payoff Structure, and Why Commodity Producers Use Zero-Cost Collars. Key definitions, formulas, and exam tips.
• Commodity Index Futures
  Commodity Index Futures (CFA Level 1): Key Elements of Commodity Index Futures, Quick Formula, and Roll Schedules. Key definitions, formulas, and exam tips.
• Negative or Zero-Bound Interest Rate Environments
  Negative or Zero-Bound Interest Rate Environments (CFA Level 1): Why Negative or Zero-Bound Rates Matter, Key Cost-of-Carry Adjustments, and Role of Central Bank Policies. Key definitions, formulas, and exam tips.