Financial Engineering and Risk Reference – Pricing and valuation formula

Here is a pricing and valuation equation glossary for the financial engineering field used as a reference for the courses posted on Learning Corporate Finance. If you have come across a missing equation previously on a Learning Corporate Finance course, you will find it here.

For a complete reference to equations and calculator referred to in our course catalog, please see the Derivative Pricing and Financial Risk Equation Glossary.

For topic specific equations, please see the following links. For a list of topics covered under each of these links, please see the index below

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Calculating Value at Risk

Duration, Convexity and Asset Liability Management

Black Scholes, Derivative Pricing, Binomial Trees

Calculating Forward Prices and Forward Rates

Valuation of Interest Rate Swaps and Future Contracts

Financial Risk, Reward metrics and measures

Black Formula’s, Valuing Interest Rate Caps and Floors

Calculating Value at Risk

Value at Risk

Outstanding term to maturity

Interpolation

Excel’s Price formula

Continuous return of daily prices

SMA volatility (?)

EWMA volatility (?)

Weights and Scaling of weights under the EWMA approach

Determining daily SMA and EWMA VaR

Determining the index value for Historical VaR

Scaling daily VaR

Duration, Convexity and Asset Liability Management

Duration & Convexity

Duration

Convexity

Approximate Price Change

Black Scholes, Derivative Pricing, Binomial Trees

Black Scholes Formula

Call option price (c)

Put option price (p)

Greeks

Binomial Tree

Probability

Price at node

European Call option

Calculating Forward Prices and Forward Rates

Forward Price

Forward price of a security with no income

Forward price of a security with known cash income:

Forward price of a security with known dividend yield:

More on Forward Rates

Spot Rates and Forward Rates

Relationship between spot rates and forward rates-1

Relationship between spot rates and forward rates-2

Yield to Maturity (YTM)

Forward Rate Agreement (FRA)

Forward Contract

Value of a long forward contract (continuous)

Value of a long forward contract (discrete)

Value of a long forward contract (continuous) which provides a known income

Value of a long forward contract (continuous) which provides a known yield

Value of a forward foreign current contract (continuous)

Forward exchange rates

Valuation of Interest Rate Swaps and Future Contracts

Interest Rate Swap

Net Cash Flow

Futures

Stock Index Futures

Futures Contracts on Currencies

Futures Contracts on Commodities

Futures Price for Treasury Bond futures contracts

Financial Risk, Reward metrics and measures

Risk Metrics

Holding Period Return

Standard Deviation/ Volatility

Annualized Return

Annualized Volatility

Sharpe Ratio

Beta

Treynor Ratio

Jensen’s Alpha

Correlation coefficient, r

Portfolio Volatility taking into account Correlations

Black Formula’s, Valuing Interest Rate Caps and Floors

Black’s Formula

Value of a caplet

Value of a floorlet

Value of a binary call option

Value of a binary call option