For FRM (Part I & Part II) video lessons, study notes, question banks, mock exams, and formula sheets covering all chapters of the FRM syllabus, click on the following link: [ Ссылка ]
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After completing this reading, you should be able to:
- Differentiate between investment and consumption assets.
- Define short-selling and calculate the net profit of a short sale of a dividend-paying stock.
- Describe the differences between forward and futures contracts and explain the relationship between forward and spot prices.
- Calculate the forward price given the underlying asset’s spot price, and describe an arbitrage argument between spot and forward prices.
- Explain the relationship between forward and futures prices.
- Calculate a forward foreign exchange rate using the interest rate parity relationship.
- Define income, storage costs, and convenience yield.
- Calculate the futures price on commodities incorporating income/storage costs and/or convenience yields.
- Calculate, using the cost-of-carry model, forward prices where the underlying asset either does or does not have interim cash flows.
- Describe the various delivery options available in the futures markets and how they can influence futures prices.
- Explain the relationship between current futures prices and expected future spot prices, including the impact of systematic and nonsystematic risk.
- Define and interpret contango and backwardation, and explain how they relate to the cost-of-carry model.
