Okay seriously… I can’t stand this session. Can you say absolute torture!!! How likely that this material shows up on the exam. If I had to wager a guess I’d say very little of it with the exception of the rebalancing/re-weighting a portfolio’s equity/fixed income allocation. I just find many of the questions in the other areas like interest rate options, caps, floors are overkill and I can’t see an item set devoted to something like this - at least that’s what I"m hoping!!!
I am worried about all the Max loss, max gain, break ever crap
On the flip side, it could be an opportunity to differentiate yourself from other candidates, as I think many feel the same way. Put another way here, marginal time spent in this area may pay off more than marginal time spent in something like private wealth mgmt. Here is my rational, based on not passing last year’s L3: Everybody (passers included) seemed to score really poorly in the AM session. I think it is fair to say that the majority of candidates spent significant time working on the am-expected material (PWM, Inst Inv, etc), and we still all scored poorly! The passing folks were the people that nailed the afternoon. Even if the AM is relatively easy this year, the PM will still be the differentiation tool for CFAI, because of all of the retakers. This stuff is worth knowing cold.
gd point, workthru
Mr.Good.Guy, for those max loss, max gain formulas, I know they look complicated but I ignored the formulas completely. If you understand what the strategy entails, you can figure out max loss, max gain and others easily. For example, in a covered call where Stock Price = 50, the max loss can be thought of as losing all value (less call premium) -> Loss = -50 + C. The formulas look confusing, my plan is to just memorize all the different strategies and know what to long/short in each one, then I can easily visualize the outcomes.
^^^ Agreed. I just remember the payoff diagrams / formulae for the four basic building blocks (long/short call/put) and you can actually work everything out from that. I hate GIPS way more.
Yeah just know the strategy and workout the payoff, etc. during the exam. It is one of the trivial stuff in the curriculum and very testable in the PM session.