Derivatives are EVIL

With only 15% of the final exam we can expect around 2 question sets from derivatives.

But the depth of the material is overwhelming me. I have just started watching the videos and they seem so difficult. There is a hell of material to go through and remember.

How much time are you all planning to invest in this topic area? Any suggestions are welcome.

Maybe these will help:

S2000magician, your write-up on Derivative is a banger, i love it, just went through it for 1 day, and i am pretty confident of banging Derivatives. Although i like Derivative, its one of the subject i have strong understanding, so i guess that made it easy for me to follow ur write-up easily. Also, since i already went through the materials for level 1 exam, it was not challenging.

But S2000magician, kudos to you man, Nice one, keep it up.

Thanks, olaj!

Anand, your post reminds me of how I felt few years back when I was taught derivatives trading for the first time. The best advise that (I think) anyone can give you is to not try to learn formulas or remember steps of pricing X instrument - but to truly understand the underlying concept logically. If you must, then spend time thinking about a formula.

Especially with non-linear derivatives - life is hell if one has to price exotics in real life and doesn’t understand it logically :slight_smile:

All the best.

I heartily with the thesis of this thread.

Derivatives are complex, but the underlying theory is simple, and from a few basic principles you can derive everything you need.

Unlike, say, Ethics, or some Econ, or some FRA, which are rote memorization.


Thanks magician and shootforthestars.

Magician your articles are excellent. Keep doing the good stuff.

I think derivatives are excellent. The problem is the unproportionate weightage given in the exam. I would love to deepply understand each and every valuation and pricing techniques had they given it a 25-30 percent weightage.

You’re quite welcome, and thanks for your kind words.