investment-education

Credit valuation adjustment (CVA) is the market price of counterparty credit risk — a risk-neutral pricing adjustment that reduces the value of an OTC derivative to account for the possibility that the counterparty defaults before all cash flows are exchanged.

Options on futures are derivative contracts where the underlying is a futures contract rather than a stock. Priced using Black’s model (Black-76), these instruments combine futures leverage with options’ asymmetric payoff. This guide covers how they work, how Black-76 prices them, and the key differences from equity options.

Barrier options are exotic options that activate (knock-in) or terminate (knock-out) when the underlying asset reaches a specific price level, offering cheaper hedging costs than vanilla options.

A collateralized debt obligation (CDO) is a structured product that pools cash-flow-generating debt assets and repackages them into tranches with different risk-return profiles, from safe senior tranches to high-yield equity tranches.

Employee stock options (ESOs) are call options granted by employers that give employees the right to purchase company stock at a fixed strike price. This guide covers vesting schedules, ISO vs NSO tax treatment, exercise strategies, post-termination rules, Section 83(b) elections, and FASB ASC 718 accounting.

Mortgage-backed securities (MBS) are bonds backed by pools of mortgage loans. Learn how securitization works, the differences between pass-through MBS, CMOs, and stripped MBS, agency vs non-agency structures, prepayment risk, and how to analyze MBS pricing and yield.

Commodity futures are standardized exchange-traded contracts for buying or selling physical commodities at a predetermined price. Learn how convenience yield, storage costs, contango, backwardation, and seasonal patterns shape commodity futures pricing.

Exotic options are options with payoff features beyond standard calls and puts. This guide covers the major types (barrier, Asian, binary, lookback, and more), why institutions use them, how they are priced, and how they compare to vanilla options.

A cash-secured put is an income-generating options strategy where you sell a put option while holding enough cash to buy the stock if assigned. Learn how it works, the payoff structure, a detailed AAPL example, and common mistakes to avoid.

A butterfly spread is a three-strike options strategy that profits when a stock settles near a specific price at expiration, offering a high reward-to-risk ratio with defined maximum loss.