Once you get a basic understanding of the underlying principles for pricing and valuing derivatives, most of the formulae are pretty straightforward, and you’ll find that it isn’t as daunting as you thought it was.

Pricing a forward, future, or swap is simply a matter of applying arbitrage. For forwards and futures, it’s cash-and-carry; for swaps it’s PV(leg 1) = PV(leg 2). For swaps, if you treat the two legs as two bonds that are traded, its easy because you know how to find the PV (i.e., price) of a bond.

Option pricing is just a matter of applying an appropriate model (such as BSM), and you don’t have to do that on the exam. Whew!

Valuing a forward, future, or swap is simply a matter of calculating the PV of each component and adding them up (using + for long and - for short). For forwards and futures, it’s (St - PV(F)) for the long position, and (PV(F) - St) for the short position (with one exception). For swaps it’s PV(received) - PV(paid). (The exception for forwards and futures is for currency, where it appears that you’re discounting today’s spot rate. That formula is never explained; I can run through it if you like so you can understand what’s going on.)

Valuing an option is no different than pricing an option (so you don’t even see “valuing an option” in the curriculum); you don’t have to do that on the exam. Whew!

Apart from that, you have to remember the Greeks for bonds, and they’re all pretty simple. (Remembering rho isn’t intuitive, but you can get it easily from the put-call parity equation.)

Seriously: Level II derivatives isn’t much harder than Level I derivatives and fixed income combined (with a smidge of econ: interest rate parity); you just have to think about the relationships. I teach this all the time, and always have candidates say, after class, “That’s a lot easier than I thought it was.” You can say the same thing.