A derivative product is a financial instrument whose value is determined completely by external variables. The external factor, or the underlying, could be anything but in general, is either a financial asset or an economic variable (such as interest rates).

Derivative instruments include forward and futures contracts, vanilla and exotic options, and swaps. These instruments may be priced or valued in a number of ways. Options, for example, may be valued using closed form solutions (like the Black-Scholes option pricing formula) or Monte Carlo Simulators or Binomial Trees.

## What are the prerequisites?

**Key concepts and terminology associated with Derivatives **

As a first step in learning about Derivatives Pricing, we begin by familiarizing ourselves with the related terminology. The following courses will help you grasp and get comfortable with the key concepts behind the derivatives language.

- Derivatives Crash Course for Dummies
- Derivative Pricing, Risk Management, Financial Engineering – Equation Reference
- Derivative Products

## What topics are covered?

**Calculation tools for pricing derivatives **

We start off by developing a better understanding of the Black Scholes equation before moving to pricing with Binomial trees and Monte Carlo Simulation. Pricing means determining the present value of the expected value of instrument on the valuation date. For this purpose, therefore, we also review interest rate modeling. These topics are covered in the following courses:

- Understanding N(d1) & N(d2)
- Computational Finance: Building Monte Carlo (MC) Simulators in Excel
- Options pricing with Binomial trees in Excel spreadsheets
- Interest Rate Simulation Crash Course

**Derivative instruments I will learn to price**

We then move on to pricing specific derivative instruments:

- Pricing Interest Rate Swaps – The valuation and MTM course
- Interest Rate Options – Pricing Caps and Floors
- Pricing Ladder Options using a Monte Carlo simulator

## Premium Content:

- Black Derman Toy Model Construction – EXCEL Example
- Calibration of CIR Model – EXCEL Example
- Constructing Volatility Surfaces in EXCEL
- Derivative Pricing – Binomial Trees EXCEL Example
- Derivatives Terminology Crash Course
- Derivative Products
- Derivative Pricing – Binomial Trees – Efficient Approach
- Delta Hedging and Greeks – EXCEL
- How to construct a Black Derman Toy Model in EXCEL
- How to utilize results of a Black Derman Toy Model
- How to utilize results of a Black Derman Toy Model – EXCEL Example
- Heath Jarrow Merton – HJM 3 – Factor Interest Rate Model
- Hedging Higher Order Greeks using EXCEL’s Solver – Package
- Interest Rate Simulation Crash Course
- Monte Carlo Simulation – Equity – Example
- Monte Carlo Simulation – Commodity – Example
- Monte Carlo Simulation – Currency – Example
- Pricing IRS – Module I – Term Structures
- Pricing IRS – Module I – Term Structures EXCEL Example
- Pricing IRS – Module II – IRS and CCS
- Pricing IRS – Module II – IRS and CCS EXCEL Example
- Pricing Interest Rate Options – Module III
- Pricing Interest Rate Options – Module III EXCEL Example
- Pricing Ladder Options using a Monte Carlo Simulator
- Principal Component Analysis – PCA – US Treasury Yield Rates
- Valuing Options – Black Scholes Example
- Valuing Options – Binomial Tree – Traditional Approach – EXCEL Example
- Delta Hedging and Greeks