TIME VALUE OF MONEY
Simple Interest and Compound Interest
Equivalent Rate, Effective Rate and Continuously Compounded Rate
Future Value (FV), Present Value (PV), Rate of Discount and Discount Factor
Net Present Value (NPV), and Internal Rate of Return (IRR)
Money-weighted and Time-weighted Rates of Return
Annuity
THE MONEY MARKETS
Certificate of Deposit (CD), Commercial Paper (CP), Treasury Bill, True Yield and Discount Rate
Value Dates, Interpolation and Extrapolation
ZERO-COUPON YIELD AND YIELD CURVE
Zero-coupon Yield, the Spot Yield Curve and Bootstrapping
The Par Yield Curve
The Forward-forward Yield Curve
FORWARD-FORWARDS, FRAS AND FUTURES
Forward-forward Interest Rate
Forward Rate Agreement (FRA)
Stir Futures Contract and Margin
Basis Risk
Spread, Butterfly Spread and Condor
STRIP
THE BOND AND REPO MARKETS
Accrued Interest, Clean Price and Dirty Price
Money Market Basis and Bond Basis
Yield to Maturity (YTM)
Current Yield and Simple Yield to Maturity
Zero-coupon Security and STRIP
Asset-backed Securities (ABS), Mortgage-backed Securities (MBS), Collateralized Debt Obligations (CDO) and Covered Bonds
Bond Futures, Conversion Factor and Cheapest-to-deliver (CTD)
Cash-and-carry Arbitrage and Implied Repo Rate
Duration, Modified Duration, Price Value of a Basis Point (PVB), Dollar Value of an 01 (DV01) and Convexity
Hedge Ratio
Repo and Reverse Repo
Haircut and Margin
Buy/Sell -Back and Sell/Buy-Back
Securities Lending/Borrowing
THE SWAPS MARKET
Interest Rate Swap (IRS)
Asset Swap and Liability Swap
Overnight Index Swap (OIS)
Currency Swap
FOREIGN EXCHANGE
Forward Outright and Forward Swap
Cross-rate
Short Dates
Forward-forward Exchange Rate
Non-deliverable Forward (NDF)
OPTIONS
Calls and Puts
The Black and Scholes Pricing Model
Historic Volatility and Implied Volatility
Binomial Pricing Model
The Put/Call Parity
Cap, Floor, Collar and Zero-cost Option
Break Forward, Range Forward and Participation Forward
Option Trading Strategies: Straddle, Strangle, Spread, Butterfly, Condor, Ratio Spread and Risk Reversal
Barrier Options: Knock-out Option and Knock-in Option
Credit Derivatives, Synthetic CDO and First-to-default Baskets
The ‘Greeks’: Delta, Gamma, Vega, Theta and Rho
STATISTICS
Mean, Median and Mode
Variance and Standard Deviation
Correlation and Covariance
Probability Density and the Normal Probability Function
RISK MANAGEMENT AND INVESTMENT MANAGEMENT
Value at Risk (VaR)
The Capital Adequacy Ratio
Efficient Markets Hypothesis
APPENDICES
Glossary
Day/Year Conventions for Money Markets
