Finance Derivatives - NU

1. Forward and Futures ContractsContract Mechanics: Differentiating between over-the-counter Forward contracts and exchange-traded, margin-adjusted Futures contracts.Arbitrage Pricing: Deriving fair asset prices using continuous risk-free rates (\(F_0 = S_0 e^{rt}\)) and adjusting for dividends or holding costs.⚖️ 2. Options Foundations & ParityOption Payoffs: Mapping intrinsic values for European and American Call and Put options at expiration.Put-Call Parity: Enforcing the static arbitrage boundary equation: \(C + K e^{-rt} = P + S_0\).🌳 3. The Binomial Option Pricing ModelPrice Trees: Discretizing underlying asset movements into precise upward (u) and downward (d) paths.Risk-Neutral Valuation: Calculating risk-neutral probabilities to price options sequentially via backward induction.📈 4. The Black-Scholes FrameworkStochastic Calculus: Modeling asset price random walks via Geometric Brownian Motion and Ito's Lemma.The Greeks: Measuring dynamic portfolio risk sensitivities including Delta (Δ), Gamma (Γ), Vega, and Theta (Θ).