Strategy to handle Derivatives

I struggle to retain information on Derivatives which looks quite complicated . How are quality of questions in real exam? How did you handle this area. Please guide. Thanks

I would recommend you focus on concepts rather than retaining information. For example when you are learning Pricing & Valuation of Forward Rate Agreement (FRA), there are several steps to remember but if you will solve one question logically / conceptually you don’t have to remember it like theory subject. Secondly I would say practice as many questions as possible. Those who study well feels exam was manageable and those who don’t feel it was really difficult, so it’s subjective - better you focus on concepts. My experience of giving Level 2 Exam was really good, it brings best out of you and you feel really challenged, CFAI Examiners are too good. Exam is not just test of your ability to answer technical questions but it will test your metal strength, if you can’t answer one question then don’t loose hope next one might be easy for you, just move on confidently and work on your strengths. Hope it helps. Good Luck.

Thanks a ton for the great guidance workharde.

I’ll throw in my 2 cents too.

Derivatives was always my highest scoring section, it has a steep learning curve but it will eventually click.

The strategies section I ignored all the formulas. If you understand the definition of the strategy you’ll know what it’s asking for. That way you get a good understanding of it so if you blank on the formula you remember okay a covered call means I sell a call on shares I own so my shares experience this price increase until the strike when the call begins earning value instead.

For the other sections I found writing out the formulas for each question very important. Some of the formulas are complicated and don’t make sense, but if you start writing them enough you begin to see what goes where and why so it becomes second nature. The thing that helped me the most was actually going through the answers to EOC questions. I killed the TT but got wrecked on the EOC questions so it gave me a false sense of security. BB examples help a lot too because it shows you step by step how to solve the complicated questions. I recommend doing the BB examples once right after you finish your reading/notes. Come back a few weeks later, work through the BB examples again and this time work through the answer. Understand why the answer is right, reference the material to reinforce why that’s the right answer and why the other answers are wrong. Then a few weeks later do that for the EOC questions and I promise you’ll have a much better understanding of it.

Thanks a lot for the useful guidance MikeHams