Derivative Equivalents

CFA Level II Portfolio Management
#1

Has anyone compiled a list of all derivatives equivalents? If not, let all of us submit our findings to this thread and we shall have a list :slight_smile:

Long call + Short put = Forward Call + Bond = Stock + Put (Put call parity) Interest rate Cap = Series of interest rate calls Interest rate Floor = Series of interest rate puts

#2

Int rate cap = series of put on fixed income

interest rate swap = series of off market FRAs

#3

To hedge against increasing interest rates (or to be compensated when rates increase):

  • Long call option on interest rates - Long put option on fixed income securities - Long payer swaption - Short eurodollar futures

To hedge against decreasing interest rates (or to be compensated when rates decrease):

  • Long put option on interest rates - Long call option on fixed income securities - Long receiver swaption - Long eurodollar futures
#4

Really dumb mnemonic for put-call parity that has worked really well for me: C-P=S-X: camp sex. The one useful piece of information I got from a review course I took last year.