## Learning Roadmap

**MFE 3F: Financial Economics Segment of Society of Actuaries EXAM M/ 3F of CAS**

This page has been upgraded and moved. An updated edition of this content including delta hedge, hedge P&L is now available at the New SOA MFE Exam 2012-2013 Prep page.

**SOA MFE 3F: INTEREST RATE MODELS **

*MFE 3F: Cox-Ingersoll-Ross interest rate model *

We discuss the simplest of interest rate models, the Cox Ingersoll Ross interest rate simulator and review the model as well as the steps required in its calibration.

- Interest Rate Simulation & Forecasting: Using CIR (Cox Ingersoll Ross) Model: Introduction
- Interest Rate Simulation & Forecasting: Using CIR (Cox Ingersoll Ross) Model: Estimating Parameters & Calibrating the CIR Model
- Interest Rate Simulation & Forecasting: Using CIR (Cox Ingersoll Ross) Model: Simulating the term structure of interest rates

*MFE 3F: Black-Derman-Toy interest rate model *

A slightly different application is used to illustrate the construction and calibration of the one factor no arbitrage Black, Derman and Toy (BDT) model

- Interest Rate Simulation Models: Black, Derman and Toy (BDT): Building BDT in Excel: Introduction
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: Define Input Cells
- Interest Rate Simulation Models: Building Black, Derman and Toy (BDT) in Excel: Define Output Cells
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: Define Calculation Cells: Construct short rate binomial tree
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: Define Calculation Cells: Construct State Price Lattices
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: Define Calculation Cells: Calculate Prices from Lattice
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: Define Calculation Cells: Calculate Yields & Yield volatility from Lattice
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: Define & Set Solver Function & Results
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: How to utilize the results of a BDT interest rate model: Derivation of Short Rates
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: How to utilize the results of a BDT interest rate model: Pricing Bonds
- Interest Rate Simulation Models: Steps for building Black, Derman and Toy (BDT) model in Excel: How to utilize the results of a BDT interest rate model: Pricing Options

**MFE 3F Course: VALUATION OF DERIVATIVE SECURITIES **

*MFE 3F: Derivative Products *

The following courses provided a detailed introduction to Options and Derivatives/ Options pricing. This material includes discussions on the put call parity , Black-Scholes option pricing model, Greeks, Exotics, etc.

- Options Crash Course for dummies
- Options & Derivatives Products
- Advance Options & Derivatives Crash course
- Options Pricing reference

*MFE 3F: Calculate the value of European and American options using the binomial model. *

This course focuses on an alternative method of implementing a two-dimensional binomial tree compared to the traditional method of building a binomial tree in excel presented in most option pricing text books. The alternate approach is based on the techniques documented by Professor Mark Broadie at Columbia Business School as part of his coursework in Security Pricing and Computational Finance courses at Columbia University and allows us to extend a simple 3 step tree to a 50 – 100 step option pricing tree in a few minutes.

The course starts with pricing European calls and put options, followed by pricing American options and closes by reviewing option pricing for Knock out and Knock in (Sudden Death). We also review the special case of a down and in option.

- Options pricing – Using binomial trees to price options in a spreadsheet
- Options Pricing – Pricing Call Options – Option pricing spreadsheet – Binomial trees
- Options Pricing – Pricing American Options – Calls and Puts – Spreadsheet implementation – Binomial trees
- Options Pricing – Pricing Put Options – Option pricing spreadsheet – Binomial trees
- Options pricing–Exotics Options–Pricing a Capped Call–Excel implementation – Binomial trees
- Options pricing – Pricing Knockout exotic options – Sudden Death Options – Down and out call options
- Options Pricing – Binomial Trees – Pricing Sudden death Options – Down and in call options
- Option Pricing – Black Scholes – Probabilities Explained: Understanding N(d1) vs N(d2)

**MFE 3F: SIMULATION **

*MFE 3F: Simulate lognormal stock prices. *

- Computational Finance: Monte-Carlo (MC) Simulation method– Building Equities, Commodities, Currencies and Interest Rate MC Simulators in Excel
- Computational Finance: Building your first Monte Carlo (MC) simulator model for simulated equity prices in Excel
- Extending MC simulation for currencies and commodities
- Computational Finance: Monte Carlo (MC) Simulation method: Understanding drift, diffusion and volatility drag
- Computational Finance: Linking Monte Carlo Simulation, Binomial Trees and Black Scholes Equation

*MFE 3F: Use variance reduction techniques to accelerate convergence *