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Master the fundamental concepts of pricing and valuing forward commitments in this comprehensive video lesson designed for Level II CFA® exam preparation. Explore the carry arbitrage model both with and without underlying cash flows, establishing the theoretical foundation for derivative pricing. Learn to price and calculate no-arbitrage values for equity forwards and futures, understanding how these instruments derive their value from underlying stock positions. Dive into interest rate forwards and futures pricing mechanisms, examining how these derivatives reflect expectations about future interest rate movements. Study fixed-income forward and futures pricing methodologies, including the complexities introduced by bond characteristics and yield curve dynamics. Understand interest rate swap pricing fundamentals and calculate their no-arbitrage values using present value techniques. Examine currency swap pricing models and learn to determine fair values for these multi-currency derivative instruments. Conclude with equity swap pricing concepts, covering how these instruments allow exposure to equity returns without direct stock ownership. Each section includes detailed calculations and practical examples to reinforce theoretical concepts, with timestamps provided for easy navigation through specific learning outcome statements required for the CFA Level II derivatives curriculum.
