This topic answers three practical questions before any smile or Monte Carlo appears: what is traded, where it trades, and which cash instruments and conventions make a forward price well-defined. Venues and participants come first; then equities and corporate actions; then the bond and money-market curve; then FX and commodity carry; then the linear derivative stack — forwards, futures and swaps — that transfers risk along that curve.
By the end of this note you should be able to:
- map exchange versus OTC execution and clearing, and classify trades by motive;
- adjust equity prices and indices for major corporate actions and quote an index futures fair value;
- price a coupon bond from zeros, read YTM limitations, and use duration as a first-order risk measure;
- apply covered interest parity and commodity storage/convenience-yield relations;
- relate futures margins and IRS valuation to the same discount curve used for carry.
In this lesson
- Contents
- The big picture
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