CISI Derivatives (CISI) study plan
CISI Derivatives · Give each week a clear focus.
8 weeks · About 7 hours per week
Derivatives fundamentals and market structure & Futures and forward contracts
Define each core derivative type (future, forward, option, swap) and state the payoff obligation each creates for buyer and seller
Map the market structure: exchange-traded versus OTC, the roles of broker, clearer, CCP and market maker, and how a trade flows from execution to clearing
Distinguish hedging, speculation and arbitrage motives and match each to a worked example
Explain the mechanics of margin, variation margin and daily mark-to-market on an exchange-traded position
Your checkpoint
A one-page glossary plus a labelled trade-flow diagram from client order to CCP novation, self-quizzed to 90% recall
Futures and forward contracts
Derive fair forward and futures prices from spot, carry, storage and convenience yield
Calculate the implied repo rate and identify cash-and-carry and reverse cash-and-carry arbitrage opportunities
Explain the cost-of-carry model's assumptions and where basis risk arises
Work through contract specifications: tick size, contract multiplier, expiry and settlement conventions
Your checkpoint
Ten cost-of-carry and basis calculations solved with full workings, cross-checked against a formula sheet
Futures and forward contracts & Options: pricing, strategies and risk
Compute mark-to-market cash flows across a multi-day futures position including margin calls
Distinguish hedging with futures from hedging with forwards and explain the roll and basis risks of each
Define intrinsic value, time value, moneyness and the payoff and profit profiles of the four basic option positions
Explain put-call parity and use it to detect mispricing
Your checkpoint
A payoff-and-profit chart set for long/short call and put plus a parity arbitrage worked example, with a 10-question self-test
Options: pricing, strategies and risk
Apply the binomial model to price a one- and two-step European option and explain risk-neutral valuation
State the Black-Scholes-Merton assumptions and explain how each input (spot, strike, rate, volatility, time, dividend) moves the price
Compute and interpret the Greeks: delta, gamma, theta, vega and rho, and describe how a delta hedge must be rebalanced
Explain implied volatility, the volatility smile and skew, and their practical implications
Your checkpoint
A Greeks sensitivity table showing the price effect of a defined change in each input, plus a written explanation of delta hedging rebalancing
Options: pricing, strategies and risk & Swaps and OTC derivatives
Explain the structure of an interest rate swap and calculate the fixed and floating legs and net settlement
Compute the swap rate as the par rate and value a swap by decomposing it into a bond or a series of forwards
Describe the main swap families: currency, cross-currency, equity, credit default and total return swaps
Explain counterparty credit risk, netting, collateralisation and how a swap's value changes over its life
Your checkpoint
A worked interest rate swap: fixed and floating leg cash flows plus a valuation at a non-par rate, with a comparison table of swap types
Swaps and OTC derivatives & Regulation, clearing, margining and ethics
Explain the regulatory architecture: clearing obligation, trading obligation, margin rules for uncleared derivatives and trade reporting
Distinguish initial margin from variation margin and explain how a CCP mutualises and manages default risk
Apply the conduct and ethics standards relevant to derivatives sales and advice: suitability, conflicts of interest, market abuse and best execution
Identify the main regulatory bodies and frameworks governing derivatives in the relevant jurisdiction
Your checkpoint
A two-page regulatory and ethics summary covering clearing, margining, reporting and conduct rules, condensed to a revision card
Derivatives fundamentals and market structure & Futures and forward contracts & Options: pricing, strategies and risk & Swaps and OTC derivatives & Regulation, clearing, margining and ethics
Complete a timed mock exam under exam conditions and log every wrong answer by domain and error type
Re-derive the core formulas from memory: cost of carry, put-call parity, binomial, Black-Scholes, Greeks, swap valuation
Revisit the two weakest domains and close each identified knowledge gap with targeted practice
Practise calculation accuracy: units, day-count conventions and sign conventions on payoffs and profits
Your checkpoint
A mock exam score with a domain-by-domain error log and a written remediation list for the weakest two domains
Options: pricing, strategies and risk & Swaps and OTC derivatives & Regulation, clearing, margining and ethics
Re-test the previously weak areas and confirm the error log items are resolved
Complete a second timed mock and improve the score and pace against the first
Consolidate a one-page formula and definitions sheet and rehearse it from memory
Plan exam-day logistics: timing per question, question triage and flagging strategy
Your checkpoint
A second mock score at or above target with the error log closed out and a final formula sheet rehearsed from memory
Milestones
Week 2: Can price a forward or futures contract from spot, carry and convenience yield and explain the arbitrage that enforces the price, without notes
Week 4: Can price a European option with binomial and Black-Scholes inputs and explain the direction and magnitude of each Greek's effect
Week 6: Can describe the clearing, margining and reporting obligations for both cleared and uncleared derivatives and apply the relevant conduct rules to a scenario
Week 7: First timed mock completed with a domain error log; weakest two domains identified and remediation started
Week 8: Second timed mock at or above target score with pace on track and error log closed out