An interest rate swap is a financial derivative instrument that involves an exchange of a fixed interest rate for a floating interest rate. Interest rate swaps are often used to hedge the fluctuation in the interest rate. To value an interest rate swap, fixed and floating legs are priced separately using the discounted cash flow approach.

http://tech.harbourfronts.com/derivatives/interest-rate-swap-derivative-pricing-excel/

We’re going to use the binomial pricing model to value an American equity option. Essentially, the model uses a “discrete-time” model of the varying price over time of the underlying financial instrument. Valuation is performed iteratively, starting at each of the final nodes, and then working backwards through the tree towards the first node.

http://tech.harbourfronts.com/derivatives/valuing-american-option-using-binomial-tree-derivative-pricing-excel/

We are going to provide an example of valuing American options. We’re going to use the Barone-Andesi-Whaley approximation. The Barone-Adesi and Whaley Model has the advantages of being fast, accurate and inexpensive to use. It is most accurate for options that will expire in less than one year.

http://tech.harbourfronts.com/derivatives/valuing-american-option-derivative-pricing-excel/

We’re going to price a put option on Barrick Gold, a Canadian mining company publicly traded on the Toronto Stock Exchange under the symbol ABX.TO. For this exercise, we assume that the option is of European style with a strike price of $13. (American style option will be dealt with in the next installment). The option expires in 3 years, and the valuation date is August 22, 2018.

http://tech.harbourfronts.com/derivatives/valuing-european-option/

Time series analysis is an important subject in finance. In this post, we are going to apply a time series technique to a financial time series and develop an investment strategy. Specifically, we are going to use moving averages to trade volatility Exchange Traded Notes or ETN.

http://tech.harbourfronts.com/trading/volatility-trading-system-time-series-analysis-python/