Cliro

CFA® Level I · 2027 curriculum

Derivatives and Risk Management for CFA® Level I

Derivatives and Risk Management explains how contracts linked to underlying assets or variables create, transfer and price financial exposures, from forwards and options to swaps, parity and binomial valuation.

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What this topic covers

Derivatives and Risk Management introduces contracts whose value depends on an underlying asset, rate, index or other variable. You will learn how the main derivative instruments and markets work, why issuers and investors use them, and the risks they create. The topic then develops the no-arbitrage and replication logic used to price forwards, futures, swaps and options before finishing with parity relationships and one-period binomial valuation.

By the end of this topic you should be able to:

  • Explain derivative instruments, underlyings, markets and the roles of counterparties.
  • Compare forward commitments with contingent claims and interpret their payoff structures.
  • Assess derivative benefits, risks and common issuer and investor uses.
  • Apply no-arbitrage, replication and cost-of-carry reasoning to derivative pricing.
  • Distinguish price from value for forwards, futures, swaps and options.
  • Use parity and one-period binomial logic to understand option valuation.

How the topic is structured

The topic moves from contract mechanics to valuation. It begins with derivative features, market structure and the main instrument types, then explains why derivatives are used and what risks they introduce. The middle modules establish no-arbitrage, replication and cost-of-carry logic before applying it to forwards, futures and swaps. The final modules focus on option value, put-call relationships and one-period binomial pricing, so later sections build directly on concepts introduced earlier.

Practice in Cliro

How you practice Derivatives and Risk Management in Cliro

  • Practice by topic

    Work through this topic on its own, or include it in a mixed session across the curriculum.

  • Detailed explanations

    See why the correct answer works after every practice question.

  • Review and mistakes

    The mistake log keeps incorrectly answered questions easy to revisit. Review brings due concepts back after time has passed.

  • Formula Gym and progress

    Recall key formulas without prompts and track progress by topic and concept.

Exam Pass and Monthly both include the two full mock exams.

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Where Cliro fits

Use Cliro at any stage of your Level I preparation.

  • Starting Level I

    Take the free diagnostic, then practice by topic. Your results build a picture of where you stand across all ten topics.

  • Retaking Level I

    Your diagnostic and practice results show which concepts are still weak. The mistake log keeps incorrectly answered questions easy to revisit, and Review brings due concepts back after time has passed.

  • Alongside your existing materials

    Cliro is designed to work alongside your core reading materials, adding question practice, mock exams, Formula Gym, review and progress tracking.

Other Level I topics

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Free diagnostic • 20 questions • No payment details required