Hi, I would like to know the importance of derivatives for level II. As most of you know, derivatives for level I is not that important, you can fail it and still pass. I don’t have a strong grasp of the material, will this cause major problems in level II. Will I fail level II if I don’t have a strong understanding of derivatives? Thank you. Rasec
Call me, we need to discuss this.
You can’t punt any L2 topic if you want to go in feeling confident of passing. There’s plenty of time so I’d suggest doing some casual reading now while the pressure is off. If you have the basics down by the end of the year there’s no reason you can’t turn this weakness into a strength come June. Honestly I feel Derivs is not too bad if you have a systematic approach. At least the rules of logic still apply, which is more than can be said for topics such as Ethics, Industry Life-cycles etc.
Agree with nirjraina. It’s all important.
That depends… How important is passing Level II?
McLeod81, Very important. I guess the consensus is… you must understand all of the material as well as you know how to drive your car in order to pass level II. Am I right?
no, not really. You just need to understand the material that is briefly discussed in the CFAI texts. As long as you understand most of the major topics (don’t worry, only a few will show up on the exam), you should be in good shape.
Derivatives is one of the easiest (if not the easiest) subjects in level II. Why? It’s mostly mechanical. I think out of 12 questions this year there were 1 or 2 that could be considered curveballs, and the rest were just knowing put call parity and knowing time value of money as it relates to interest rates. Don’t be scared by derivatives, they should be an easy >70% for you. If they really give you trouble, spend a couple hundred on a review course, and they will pound the concepts into your head.
As someone who formerly hated and feared derivatives, I have to agree with everyone’s sentiments here. I failed derivatives in my first attempt at LII, and if I was fortunate enough to pass level II this time around, it will be in part because I spent so much time with the derivatives material. I found that the key is really just spending a ton of time getting to know and understand the material. I would suggest starting early and reviewing it often until it clicks. After 3-4 passes (on my second attempt, no less), I was still having a hard time and decided to just focus on it for a week or two until I got it down. I took baby steps and made sure I was 100% confident on each concept before moving on (this way at least I know I’d get that point if it was asked, even if I never figured the rest out). Eventually it all just clicked but it took a lot of time, reading, videos, and practice questions, and now sometimes I wonder what the big deal was in the first place. This stuff doesn’t go away, either… it will be back at L3. You have so much time before next year that there’s no reason you can’t do the same… just make sure not to put it off to the end when you’re frustrated and trying to stick to a schedule. I would suggest the same to anyone who is struggling with quant (especially time series) as both are really conquerable and there are usually some relatively easy questions to pick up on the test if you understand what you’re doing. In reality, there’s nothing in the curriculum that is beyond your understanding if you just take the time to learn it and to learn it right… the test is hard enough on its own, even if you do know everything pretty well. Punting any entire topic or even reading is too risky IMO, especially when you have enough time to figure out early where your trouble spots will be and can allocate plenty of time to conquer it.
if you need to measure it against L1: not studying derivatives for L2 would affect your grade in a way similar to only studying 50% of FSA for L1
100% agree with Aimee. Personally I found derivatives to be the most challenging part of the Level II curriculum. About a month before the exam, I ended up reading Schweser’s derivatives section twice (after reading the CFA once!) and watched all of the videos as well. And yet, I still struggled with some of the tedious swap valuations. However, we all know how conceptual the test is, so I ended up punting on a lot of the more difficult calcuations and focused instead on the big picture and how values are affected directionally by various market conditions, etc. I knew I would have to guess on a couple of questions, but my goal was to get around 60-70% in derivs and I think this strategy got me close to that. So, to answer your question, yeah you are going to have to spend a lot of time on derivatives if you want to pass Level II.
very important. and you might as well learn it now, because if you have any aspirations to finish the progrm, it is equally as important and complicated at level 3. its not something you cant overcome. its easily my worst area of the material. but you need to at least be able to pick up points and qualitatively understand how the instruments work.
Everything is important at level II. You may be able to get away with not studying for alternative assets, if you think you could trade off getting better section scores in all other sections by sacrificing the time you would have spent on the alt assets section. The other sections with 5% allocations are cheaper points (meaning requiring less efforts than on alt assets) since they should be more familiar than alt assets to level 2 candidates. A
supersharpshooter Wrote: ------------------------------------------------------- > if you need to measure it against L1: not studying > derivatives for L2 would affect your grade in a > way similar to only studying 50% of FSA for L1 C’mon this is an exaggeration. But I agree with Aimee. I was having a hard time with derivatives for most of the time that I was studying, so I made sure to keep at it and keep reading, trying problems, studying, etc. until it just clicked. I would say of all the topics that each comprise 10% of the test (CF, Ethics, Deriv, Fixed Income, whatever else I’m missing), I spent the most time on derivatives.
L2 derivatives = 10% L1 fsa = 20% giving up on 10% = giving up on 1/2 of FSA in L1 where is the exaggeration?
I stand corrected. I guess FSA is only 20% at L1. It sure felt like a lot more than 20%.
SmokeyJoeWood Wrote: ------------------------------------------------------- > Derivatives is one of the easiest (if not the > easiest) subjects in level II. Why? It’s mostly > mechanical. I think out of 12 questions this year > there were 1 or 2 that could be considered > curveballs, and the rest were just knowing put > call parity and knowing time value of money as it > relates to interest rates. > > Don’t be scared by derivatives, they should be an > easy >70% for you. If they really give you > trouble, spend a couple hundred on a review > course, and they will pound the concepts into your > head. THIS IS AN EXCELLENT PIECE OF ADVICE IN SHORT FORM! Great, would like to meet with this fellow
Thank you all for your valuable comments.