dear team
swaps is my weakest area and i want to know if any one has an advice on how to tackle this topic for good.Secondly,does understanding l3 swaps is built on my undestanding of level 2.i mean do i need to refersh my mind on level 2 swaps in order to be able to undestand l3.
Hi Malwan,
Swaps are one of the difficult, but popular, concepts in today’s markets.
CFA institute apparently loves to test L3 guys on swaps!
Level2 is more about valuation of swaps with some points thrown in about their application.
It’s about individual swaps
Level3 digs deep into application of understanding of swaps in a portfolio context,on how they are made use of by corporates(floating to fixed and vice versa),how to modify thier duration,managing equity market risk,
floaters and inverse floaters and their application ,notional amount to be hedged etc.
Also swaptions are there.But the questions on swaptions are not very difficult…they test whether you understand which swaption will hedge which liability based on whether it is payer/receiver swaption…and prevailing interest rate scenario…
If any particular question/concept that bothers you,you are welcome to throw open to the forum.
Level 2 basics need not necessarily be revisited,you will understand things as you go.
Review swaps extra if you’re weak in that area, apply to all. Focus on understanding, not rote memorization. Remember, Level III focuses on the ability to assimilate and synthesize the curriculum. At this stage, you must pull it all together.
Taught properly, swaps are actually quite easy.
Take a look at the articles I wrote for swaps at Level II: http://financialexamhelp123.com/level-ii-derivatives/
Word!
thank you guys for taking the time to provide your feedback much appreciated.
My pleasure.