CFA Level I Derivatives Calculations

TL;DR

Derivatives calculations use no-arbitrage logic. The highest-yield workflows are forward price, forward value, option payoff, put-call parity, and Black-Scholes input handling.

Formula Reference

F0 = S0 x (1 + r)^T

max(0, S_T - X)

c + PV(X) = p + S

BA II Plus Keystrokes

1. Use TVM for present value of exercise price.
2. Use max payoff logic manually.
3. Use LN and e^x for Black-Scholes components.

Worked Example

• Stock = 40, strike = 35, call premium = 6.
• Call payoff at expiration = max(0, 40 - 35) = 5.
• Call profit = 5 - 6 = -1.

Common Mistakes

• Confusing payoff with profit.
• Forgetting dividends or costs in forward pricing when provided.
• Applying American option intuition to European put-call parity.

Related Guides

• CFA Level I Derivatives Formula Sheet - Public formula sheet for forwards, futures, options, put-call parity, and Black-Scholes inputs.
• Black-Scholes on BA II Plus - How to structure Black-Scholes option inputs and what the BA II Plus can and cannot do directly.
• BA II Plus: Continuous Compounding Step by Step - Use LN and e^x on the BA II Plus for continuously compounded returns and discounting.