This is the first level 2 reading I have felt completely lost on, either I do not remember enough of L1 FI or there is a major gap between where L1 ends and L2 begins. Does anyone have any outside study material they would recommend for for this reading? I am currently only using the CFAI material.
Its actually not that terrible if you spend some time on it.
I’m happy to send you some notes explaining the chapter in simple language (send me your email address in a private message)
Thank you I appreciate it, PM sent. I’m sure you are right, a few more read-throughs and a few outside explanations will probably clear up the new core concepts. I was just surprised how much new information was thrown at you in so few pages starting this section out.
The biggest problem with that reading, in my humble opinion, is the lousy notation that they’ve adopted; it makes reading and understanding unnecessarily complicated.
The first part should be familiar to you: calculating forward rates from spot rates and vice versa, and calculating spot rates from par rates and vice versa. That was covered at Level I.
Riding the yield curve is relatively easy to understand, although their explanation may not be the clearest.
The yield curve theories you simply have to memorize. Sorry.
I wouldn’t spend a lot of time on the term structure models (CIR, Vasicek, Ho-Lee). If you have a high-level understanding them, that should be sufficient.
The factors affecting the yield curve make for interesting reading, and calculating the associated durations isn’t all that difficult. Simply remember that you’re trying to determine how each factor affects the price of bonds of different maturities.
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I completely agree with what you have said here, while some of my problem were the curve relationships I had forgot since level 1, I really felt that sections 1-3 were presented as more complicated than it needed to be. I did find the models and theories to be understandable. If anyone else is struggling with this part I did find several resources that presented some of the information in sections 1-3 a little more clearly.
https://youtu.be/_7Lt9CVJodk (Bootstrapping)
http://financialexamhelp123.com/par-curve-spot-curve-and-forward-curve/ (Curve refresher since level 1)
I’m somewhat familiar with this one.
Frankliving
Would be so kind and send me the simplified notes please on this very topic I was thinking I am a little dumb after reading it for two hours. My email address is sandrab@witkoppen.co.za.
Many thanks
Shami
Sent - let me know if something isn’t clear
Crisp.