16

Summary of pricing formulae

Notation

Time value of money

Money markets calculations

Capital markets instruments

Financial futures

Forward rate agreements (FRAs)

Interest rate swaps

Foreign exchange

Option characteristics

Option pricing

Bond derivatives

Equity derivatives

Probability and statistics

Yield curves

NOTATION

iannual interest rate
nnumber of payments per year
daysnumber of days in the investment/coupon period
yearnumber of days in a year
Nnumber of years or coupon periods
Pprice
APRannual percentage rate, effective rate or equivalent annual rate
PVpresent value
FVfuture value
DFdiscount factor

TIME VALUE OF MONEY

Effective and nominal rates

Relationship between the interest rate i with n payments per year and the APR:

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