The Arbitrage-Free Valuation Framework (2024 Level II CFA® Exam – Fixed Income –Module 2)

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Topic 6 – Fixed Income
Module 2 – The Arbitrage-Free Valuation Framework
0:00 Introduction and Learning Outcome Statements
3:10 Explain what is meant by arbitrage-free valuation of a fixed-income instrument.
7:28 Calculate the arbitrage-free value of an option-free, fixed-rate coupon bond.
11:57 Describe a binomial interest rate tree framework.
17:40 Describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node.
22:53 Describe the process of calibrating a binomial interest rate tree to match a specific term structure
29:24 Compare pricing using the zero-coupon yield curve with pricing using an arbitrage-free binomial lattice.
37:05 Describe pathwise valuation in a binomial interest rate framework and calculate the value of a fixed income instrument given its cash flows along each path.
39:43 Describe a Monte Carlo forward-rate simulation and its application.
41:20 Describe term structure models and how they are used.