Study Notes for CFA® Level III 2025 – Derivatives and Risk Management – offered by AnalystPrep

Study Notes for CFA® Level III 2025 – Derivatives and Risk Management – offered by AnalystPrep

Learning Module 1: Options Strategies

Los 1(a): Demonstrate how an asset’s returns may be replicated by using options

Los 1(b): Discuss the investment objective(s), structure, payoff, risk(s), value at expiration, profit, maximum profit, maximum loss, and breakeven underlying price at expiration of a covered call position

Los 1(c): Discuss the investment objective(s), structure, payoff, risk(s), value at expiration, profit, maximum profit, maximum loss, and the breakeven underlying price at expiration of a protective put position

Los 1(d): Compare the delta of covered call and protective put positions with the position of being long an asset and short a forward on the underlying asset

Los 1(e): Compare the effect of buying a call on a short underlying position with the effect of selling a put on a short underlying position

Los 1(f): Discuss the investment objective(s), structure, payoffs, risk(s), value at expiration, profit, maximum profit, maximum loss, and the breakeven underlying price at expiration of the following option strategies: bull spread, bear spread, straddle, and collar

Los 1(g): Describe uses of calendar spreads

Los 1(h): Discuss volatility skew and smile

Los 1(i): Identify and evaluate appropriate option strategies consistent with given investment objectives

Los 1(j): Demonstrate the use of options to achieve targeted equity risk exposures

Learning Module 2: Swaps, Forwards and Futures Strategies

Los 2(a): Demonstrate how interest rate swaps, forwards, and futures can be used to modify a portfolio's risk and return

Los 2(b): Demonstrate how currency swaps, forwards, and futures can be used to modify a portfolio's risk and return

Los 2(c): Demonstrate how equity swaps, forwards, and futures can be used to modify a portfolio’s risk and return

Los 2(d): Demonstrate the use of volatility derivatives and variance swaps

Los 2(e): Demonstrate the use of derivatives to achieve targeted equity and interest rate risk exposures

Los 2(f): Demonstrate the use of derivatives in asset allocation, rebalancing, and inferring market expectations

Learning Module 3: Currency Management: An Introduction

Los 3(a): Analyze the effects of currency movements on portfolio risk and return

Los 3(b): Discuss strategic choices in currency management

Los 3(c): Formulate an appropriate currency management program given financial market conditions and portfolio objectives and constraints

Los 3(d): Compare active currency trading strategies based on economic fundamentals, technical analysis, carry-trade, and volatility trading

Los 3(e): Describe how changes in factors underlying active trading strategies affect tactical trading decisions

Los 3(f): Describe how forward contracts and FX (foreign exchange) swaps are used to adjust hedge ratios

Los 3(g): Describe trading strategies used to reduce hedging costs and modify the risk-return characteristics of a foreign-currency portfolio

Los 3(h): Describe the use of cross-hedges, macro-hedges, and minimum-variance-hedge ratios in portfolios exposed to multiple foreign currencies

Los 3(i): Discuss challenges for managing emerging market currency exposures

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    Daniel Glyn
    Daniel Glyn
    2021-03-24
    I have finished my FRM1 thanks to AnalystPrep. And now using AnalystPrep for my FRM2 preparation. Professor Forjan is brilliant. He gives such good explanations and analogies. And more than anything makes learning fun. A big thank you to Analystprep and Professor Forjan. 5 stars all the way!
    michael walshe
    michael walshe
    2021-03-18
    Professor James' videos are excellent for understanding the underlying theories behind financial engineering / financial analysis. The AnalystPrep videos were better than any of the others that I searched through on YouTube for providing a clear explanation of some concepts, such as Portfolio theory, CAPM, and Arbitrage Pricing theory. Watching these cleared up many of the unclarities I had in my head. Highly recommended.
    Nyka Smith
    Nyka Smith
    2021-02-18
    Every concept is very well explained by Nilay Arun. kudos to you man!
    Badr Moubile
    Badr Moubile
    2021-02-13
    Very helpfull!
    Agustin Olcese
    Agustin Olcese
    2021-01-27
    Excellent explantions, very clear!
    Jaak Jay
    Jaak Jay
    2021-01-14
    Awesome content, kudos to Prof.James Frojan
    sindhushree reddy
    sindhushree reddy
    2021-01-07
    Crisp and short ppt of Frm chapters and great explanation with examples.