Week 14: Fixed Income & Derivatives

We are rapidly approaching the light at the end of the tunnel with just two more weeks of reading on the to do list. Please remember to record your results in the week 13 progress report.

The week to come:

As mentioned last week, the fixed income topic area is divided into two separate study sessions. The second study session is divided into 2 readings. We are going to cover these two and the first reading in the derivative markets and instruments topic area this week.

The first reading (Understanding Fixed-Income Risk and Return) is primarily occupied with defining, calculating and interpreting duration and convexity, the next and final fixed income reading is on the topic of credit analysis. We are also going to cover the very first reading in the derivative markets and instruments topic area, providing a high level introduction to same.

There is perhaps again a few insights to be gleaned from the relationship between the size of the individual readings and the number of end of LOS and end of chapter questions. The first fixed income reading is comparatively shorter but contains more LOS and end of chapter questions than the other two readings covered this week. So if you have to skimp anywhere make sure that you read the Understanding Fixed-Income Risk and Return reading in depth. The reading also provides a solid grounding in the concepts of duration and convexity that you will use throughout the 3 year CFA® Program.

Just as a reminder here is the trusted study approach that we have applied throughout the study program:

  • Please ensure that you write down and answer the LOS as you work your way through each reading. The combined effort of question practice and LOS statement “hunting” will ensure that you are focused on seeking out the most important information as you progress through each reading. Once you are done with each reading flick through the flashcards and make a note in your question log about those flashcards that you are still struggling to answer.
  • Also, please ensure that you attempt the end of chapter questions from the curriculum as soon as you finish each reading. As you answer the questions make a note in your question log about the most difficult ones (especially whenever you resort to guessing). When you are done with the questions, review your answers thoroughly (particularly those that you got wrong) and add these questions to your question log as well.
  • Lastly, as you wrap up each reading attempt only the challenging flashcards and end of chapter questions from your question log. Revise your answers and make a note of those that you are still struggling with. Continue this same process each day until you can answer all with confidence.

Please record your progress in your week 14 progress report.

In week 15 we are completing Derivatives and Alternative Investments.

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