black scholes model and how it works - how does output change for a given change in input

- call, put options

- difference between European and American

- plan vanialla swaps

- complex swaps

- what are swaps in general

- binomial trees

- three ways of valuing derivatives

- how do discount rats work

- understand factors that affect risk (duration of instrument, business risk, geographical risk, political
risk) longer period more risky or shorter period more risky

- PSU (performance share units)

- Black scholes formula

Strike price -present value of the

- volatility pushes call price up

- how does it change --> it makes it go up, does it affect the price of put option. why does it go up?
volatility goes up pushes stock price up. Idea of it, how the input affects,

Bionomial trees:

- understand the existence of it.

- steps, american stock option. european can only

- not oging ot know wat it is in the middle

- vluing option is a method

Monte carlo:

- Inputs normal distribution. Mean of 0 standard deviation of 1.

- geometricn brownian motion

- bascially idea of drifting

- stacastic: a random process/walk

- random probability distribution

- random number supposed to

- used to predict a stock price and were it will end up

- forecasting stock prices

monte carlo simulation

- multiple probability simulation

- integreation of GBM

- applied to predict

- used to predict stock price

- GBM.

- montecarlo is a tool that is use dot execute pathways GBM

- i think a stock price has variablity that fixed income doesnt have. Randomness and volatility is
somehting that fixed income doesnt have

- givern a confidence interval, the accuracy of these are 100% accurate, events happen in real life that
cannot be happened

- most accurate way to go about options.

- IFRS 2 and 9: stock based compensation, financial instruemnt. IFRS 13 is fair value

-basically probability based simualtion, based on a certain simualtoin. financial valuaiotn use GBM for
stock price. why its stacastic in nature. cuz they can drop in random events. it drifst with index and also
has opporunity for shocks whihc is captured in GBM.

fixed income

- bonds treasury bills

- they determine discount rates

- ask: PV debt. how to determine a dsicount rate

--> direct determinate risk of a company

-->geogrpahical, country, business risk., specific risks, economic risks. spread on rf so rf al;so affects it

swaps -

neutralizing exposures

PSU-

performance share units

- bascially comapny get a defined plan for PSU. state criteria. based on selected

convertible bonds and callable bonds

- how to convert a call feature

- basics

- convertible is for holder

- lower coupon --> lower value for additoinal deature

- callble is for issuer

- higher discount -->

how to value convertible bond

- conversion feature. value of the equity can outweigh the debt

-call option

- market intererst rates. when isthe optimal time to call the bond

- based on interest rates now and what interst rate you can get

- riddles

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