Derivatives feature prominently on the CFA exam and that is the focus of this course. We will cover derivatives with a primary focus on options, but also including forwards and futures. Derivatives are harder to price than other investments, so in addition to talking about the characteristics of call options and put options, we will also go over how they are priced including the Black Scholes formula and the inputs to it.

Learning Objectives
  • Discover a derivative and distinguish between exchange-traded and over-the-counter derivatives.
  • Explore how the concepts of arbitrage, replication, and risk neutrality are used in pricing derivatives.
  • Identify the factors that determine the value of an option and explain how each factor affects the value of an option.
  • Explore how the value and price of a forward contract are determined at expiration, during the life of the contract, and at initiation.
  • Identify high level strategies for dealing with derivatives questions on the CFA.
Last updated/reviewed: August 27, 2023

Included In Certifications

This course is included in the following Certification Programs:

11 CoursesCFA Level 1 Preparation Certification Program

  1. CFA Level 1 Prep: Introduction to the CFA Exam
  2. CFA Level 1 Prep: 1 - Ethics and Professional Standards
  3. CFA Level 1 Prep: 2 - Quantitative Methods
  4. CFA Level 1 Prep: 3 - Economics
  5. CFA Level 1 Prep: 4 - Financial Reporting and Analysis
  6. CFA Level 1 Prep: 5 - Corporate Finance
  7. CFA Level 1 Prep: 6 - Equities Markets
  8. CFA Level 1 Prep: 7 - Fixed Income
  9. CFA Level 1 Prep: 8 - Derivatives
  10. CFA Level 1 Prep: 9 - Alternative Investments
  11. CFA Level 1 Prep: 10 - Portfolio Management
2 Reviews (14 ratings)

Reviews

5
Member's Profile
I learned from this course the terminology and many basic concepts about derivatives (options and futures), including intrinsic and time value, long and short, call and put, option valuations, forward contracts and future contracts.
5
Member's Profile
Very clear and concise overview of the derivatives with the right amount of practical review and mathematical explanations
Prerequisites
Course Complexity: Advanced

No advanced preparation or prerequisites are required for this course. However being part of a series, you may consider taking all related courses in sequence: https://www.illumeo.com/curriculum/cfa-level-1-preparation

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
  Course Overview CPE
Course Syllabus
INTRODUCTION AND OVERVIEW
  Derivatives Basics10:11
  Option Payoffs10:45
  Option Payoffs Cont'd6:18
  Option Market11:11
  Future and Forwards8:24
  Derivatives Test Taking Strategies2:38
CONTINUOUS PLAY
  CFA Level 1 Prep: 8 - Derivatives49:27
SUPPORTING MATERIAL
  Slides: CFA Level 1 Prep: 8 - DerivativesPDF
  CFA Level 1 Prep: 8 - Derivatives Glossary/ IndexPDF
REVIEW AND TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam