By the FinLingo Team | Capital markets practitioner, front office experience at a major European investment bank. FinLingo covers 342 lessons from bonds to exotic derivatives. About · Last updated:
Flashcards are the fastest way to build the automatic recall that practitioner-level derivatives knowledge requires. This page gives you the 20 core concepts every finance student should know cold, grouped by topic, each stated in the compact form that actually sticks.
1. Forward contract. A private agreement to buy or sell an asset at a fixed price on a future date. No premium at inception. Settlement at expiry only. Counterparty risk bilateral.
2. Futures contract. A standardised forward traded on an exchange with daily margin settlement. Counterparty risk eliminated via central clearing.
3. Forward price. F₀ = S₀erT for a non-dividend-paying asset. Modified to F₀ = S₀e(r-q)T when the asset pays a continuous dividend yield q.
4. Cash-and-carry arbitrage. If the forward price trades above F₀ = S₀erT, you can buy spot and sell the forward to lock in a risk-free profit. This is the force that keeps forward prices aligned with the formula.
5. Interest rate swap. Two parties exchange interest payments on a notional amount: one pays fixed, the other pays floating (typically tied to a reference rate like SOFR or ESTR). Notional is not exchanged.
6. Swap spread. The difference between the swap rate and the yield of a government bond of matching maturity. Used as an indicator of credit and liquidity conditions.
7. Basis swap. An exchange of two floating rates, each tied to a different reference (e.g., 3M SOFR vs 6M SOFR, or USD LIBOR vs EUR LIBOR). Used to arbitrage rate spreads or hedge currency basis.
8. Call option. The right, not the obligation, to buy the underlying at strike K on (European) or by (American) a specified date. Payoff at expiry: max(S − K, 0).
9. Put option. The right, not the obligation, to sell the underlying at strike K. Payoff at expiry: max(K − S, 0).
10. Put-call parity. C − P = S − Ke-rT for European options on a non-dividend-paying underlying. A violation is an instant arbitrage.
11. Black-Scholes call formula. C = SN(d1) − Ke-rTN(d2) where d1 = [ln(S/K) + (r + σ²/2)T] / (σ√T) and d2 = d1 − σ√T.
12. Delta. dV/dS. Call delta is N(d1), in [0, 1]. Put delta is N(d1) − 1, in [−1, 0].
13. Gamma. d²V/dS². Same for calls and puts: φ(d1) / (Sσ√T). Peaks at the money.
14. Vega. dV/dσ. Sφ(d1)√T. Quoted per 1% vol move. Peaks at the money and with longer expiries.
15. Theta. dV/dt. Usually negative for long options. Quoted as daily € P&L.
16. Rho. dV/dr. Call rho is positive; put rho is negative. Matters most for long-dated options.
17. Autocall. A structured note that automatically redeems early if the underlying is above a reference level on specified observation dates. Pays a coupon at each observation. Built from vanilla + barriers + funding leg.
18. Reverse convertible. A short put with a barrier, combined with a bond. The investor earns a high coupon and takes equity downside if the barrier is breached at expiry.
19. Phoenix autocall. An autocall variant where coupons are conditional on a coupon barrier, and memory feature lets missed coupons accumulate and pay on subsequent observations.
20. Capital-protected note. A zero-coupon bond plus a call option on the underlying. The bond returns par at maturity; the call provides participation in upside. Capital is protected at expiry regardless of underlying performance.
Read through them once to map the territory. Then drill with spaced repetition: review cards you get wrong sooner, cards you get right later. Aim for automatic recall on all 20 within 2-3 weeks of daily practice. The goal is not to memorise formulas for their own sake — it is to internalise the vocabulary so you can think about problems without stopping to look things up.
The Greeks (cards 12-16) and options fundamentals (cards 8-11) appear in nearly every markets interview. Put-call parity and the Black-Scholes formula are asked as technical verifications. The structured products cards (17-20) matter specifically for structuring desks and for firms that distribute notes to private wealth clients.
No. Formulas without intuition break under unfamiliar questions. For each formula, also learn the one-sentence intuition: why does put-call parity hold? Why does gamma peak at the money? Why is vega largest for long-dated ATM options? The intuition is what survives; the formula is its shorthand.
FinLingo has 342 units and a built-in flashcard system that spaces repetition by topic, desk, and difficulty. Level 1 is free.
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