I’ll have to review this again at some point. any thoughts on memorizing the formulas?
Just praying valuing swaps doesn’t show up.
I’m reading this book for the second time this week. First read through I really only concentrated on theory. This time through i’m going slow, making sure the formulas are on speed dial. i’m finding having the theory down makes the formulas really really easy. besides a few random, they are actually extensions of themselves. Agreed on the swaps though, that was my main trouble spot first round through which is ridiculous since i’ve even worked in swaps.
By stalling as long as I can before having to go back over them 
I know I have to get this stuff down but it just seems so daunting to me because I stink at outright formula memorization and it seems that’s basically what you have to do. Hopefully its not as bad as I make it out to be but I just couldn’t seem to get a handle on these last year and so far its no better this time. I hear working problems is helpful so I will try and do all of the q-bank and EOCs on the topic if I have the time.
Favorite part of the curriculum after FSA and equity. How will I perform on the test on this section? I’ll find out June 6th!
+1 I’ll tag up with AliMan on this - FSA
I divided all topics into must-knows and good-to-knows. Must-knows: these I will spend most of my time on and continue drilling on Qs. -Future and forwards (stock, bond, stock index, be familar with both discrete and continuous formulas) -Currency -Bond future -Arbitrage relationships -Put-call parity Good-to-knows: these are secondary topics. While not as important as the must-knows, I will spend enough time so I will be comfortable if questions come up. -factors influencing call and put value (int, strike price, volatility, etc) -bi-nominal tree -basics of cap and floor -Black Scholes (model assumptions and calculation) -Greeks (definition and how each one relates to valuation) -FRA After that, try your best with the rest of the topics but realize you won’t be able to master everything.
Put FRA and binomial trees in your must-knows 
poorly
not that far yet. still at ss14.
Derivatives is driving me nuts…and cutting down on my revision days…I guess there is no simple way to master the Derivatives…
it sucks. was my only section <70 in L1 and am enjoying it even less here all that swaptionFRAfixedpayerLIBORindexfloatingmumbojumbobullshitcrap (which is exactly what my brain thinks everytime it seems a complex swap question)
sorry guys…I am Level1…posted my comments incorrectly in Level 2
I hate D’s in L2. All the adjustments to the rates and etc… I get so lost and often find myself saying WTF!!! Why did they do that?
GENTLY!!!
Know the synthetic positions in the options. - Don’t even worry about the formulas. All you have to remember is that if you add stock to a cal - you just synthetically created a put. - and vice versa. like if your long a call and you sell stock (on a one-one ratio) - you are now long a put. This will save your brain on the messy formula they give and makes the path to call/put parity easy, which you should also probably know. Remember - buy call + short put = a combo (synthetic long stock) which is essentially the future. - delta = 1.00 - in CFA language it gets annoying cause they talk about this being akin the bond position.
Just a tip for delta / gamma for mathy types: Delta is just the derivative of option value with respect to the underlying asset, and gamma is just the second derivative. Now you never have to bother trying to remember any of the other formulas… delta = d(option value)/d(S0) gamma = d^2(option value)/d(S0)^2 = d(delta)/d(S0) If you feel like going overboard and actually looking at the PDE BSM is based off of, the wikipedia page is pretty handy: http://en.wikipedia.org/wiki/Black-Scholes#Black.E2.80.93Scholes_PDE
Thanks for the help dmd I think you should say tip for delta/gamma for “anyone” If one doesn’t know what a second derivative is, then I worry for that person. Then again, there are some good investors who never graduated high school, like Francis Chou.