I am stuck with SS17---- swaps and options. Please tell me how to tackle this one. I really need help, everyone, pleeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeease. I know Binominal, put call parity, calculating artibrage. Its the SWAPS! What do I do? Its like a mental road block!
do a lot of practice problems
My advice is to do ALL CFAI end of chapter questions for derivatives. Schweser is simply not enough. You will be an expert after you tackle all of the CFAI EOC questions. Trust me, they cover all situations.
and look for jscott24’s explanations on this forum. jscott is the new schweser.
Look at CFAI end of chapter questions. Their approach is more general than Schweser’s as it accounts for exchange rate changes in currency swap valuation. Schweser made an assumption that exchange rate remains constant throughout the life of a swap.
Here is how I tackled most of the SS16, 17. I sat down in front of my computer, I would take out a pen and wrote down the formula for a particular derivative (say, FRA). I would then just look at for two, three hours until it made sense to me. I know, it’s a pain. But once you get it, you get it.
Just do it! I hate derivatives/swaps too! Mainly I hate swaps because they are custom contracts written by lawyers, and I hate lawyers. I did most of SS17 yesterday, I’m going to start SS18 and review SS17 when I get tired of 18. CFAI end of chapter questions are key likewise.
Brutal. Derivatives is about the only section that I don’t feel at all comfortable with, so I vowed to work it starting yesterday morning until I get it. Or until Wednesday, whichever comes first. 8 hours yesterday, 5 hours in today and counting…
Just some general comments to help. 1. Think of a swap as a floating rate bond and a fixed rate bond. 2. If you are receiving fixed, paying float, you have bought a bond that pays fixed, and you pay the floating rate. 3. If you are receiving float, paying fixed- vice versa of point # 2. 4. At intiation, a swap is valued at zero i.e. the present value of fixed rate payments equal to the present value of floating rate payments. 5. At reset date- the value of the floating leg is always par therefore you only need to know the next reset. Agree with rest of the board… if you can do some practice problems you will be ahead of the game.
I’m with you Chi. Have you found anything that helps?? Derivatives is pretty much the only section I KNOW I will bomb… I’ve read Schweser, been to the online class, completed ALL of the Q-bank q’s (average score of 70ish if I remember right) and I still got a fat 6/12 on Book 1 2PM… and I was lucky to get it because I guessed at more than half of them! I think I may watch the online class once more and then spend some quality time with the CFAI book… I’m at a loss as to what else I can do at this point. With most topics if I just spend enough time on it, it sinks in… but I never feel dumber than I do after getting destroyed by swap or FRA questions. So frustrating!!
I am doing good in SS16. Lot of CFA questions, Schweser and Qbank. I was lost in Schweser with SS17. I mean binomal was ok and so was delta hedging. But my God, the Swap, did not get a word. I would just leave it like the currency translation. But those are the only two areas left. I was with secret sauce yesterday. And Book 1. So today I am doing CFA EOC questions. I should be ok hopefully in a day, two or whatever 3 days then it is currency translation! Where do I find jscott24’s?
JScott 24 FRAs http://www.analystforum.com/phorums/read.php?12,754042,764130#msg-764130 Swaps: http://www.analystforum.com/phorums/read.php?12,749056,750229#msg-750229
Grab a pen and paper, then draw the time line and the diagram. read the textbook if you can’t understand the notes. Do some questions then read the textbook again, again and again until you master the material. Then review every day till exam day…