Learn financial derivatives for free, one question at a time
Short lessons, worked examples, and practice in options, futures, and swaps.
When I taught financial derivatives at Stockholm University, I kept seeing the same mistakes in students’ calculations.
An American option can be exercised before expiry. When valuing one, some students forgot to compare exercising now with waiting. Others made the comparison but continued using the value of waiting, even when exercising was worth more.
I built DerivaSteps so students have a place to practise those steps, get feedback and try again with new numbers. Every lesson is free and needs no account.
How a lesson works
Each lesson teaches one idea, in five steps:
1. Read a short explanation and a worked example, with a picture or a table where it helps.
2. Try a question that applies the idea.
3. Change an input on a chart, or step through a calculation, and see how the result changes.
4. Work through an example, then solve a question with hints, then one on your own.
5. Practise with new numbers. If an answer is wrong, the feedback shows the formula again. When the answer matches a common mistake, the feedback also names the step that went wrong.
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A skill counts as mastered after three correct answers in a row, with each kind of question answered correctly at least once. It then comes back on the start page for a short review after one day, and after each correct review the wait grows, up to 30 days. Practice spread over several days is remembered longer than the same practice in one day.
What you can study
The site has seven levels:
1. Payoffs and profit of options and forwards
2. Forwards and futures
3. Interest rates and swaps
4. Binomial trees
5. Option premiums and strategies
6. Hedging with futures
7. The Black-Scholes-Merton formula and the Greeks
Each level ends with mixed practice, where you must decide which method a question requires. An option calculator also values European and American calls and puts with your inputs and shows every step of the calculation.
DerivaSteps is for students taking a first course in derivatives and for anyone who wants to work through how options, futures, and swaps are priced and used.
Explore the lessons at derivasteps.com. If you find a mistake or an unclear explanation, use the site’s report page to let me know.
