Derivatives

C

CFready

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
Do we need to know any formula/ calculation on derivatives? There aren’t any “caculate” on the LOS so I would assume no, but there are a lot of formulas!
 
Ok, youre a charter holder, so I should take your word, but can you explain your response?
 
I’ve been teaching review courses for all three levels of the CFA exams for 10 years.
In Derivatives, they ask you questions about the formulae (e.g., calculating the payoff on an FRA, calculating the minimum price on an American call option, and so on).
You need to know the formulae.
 
Wait, so does that mean the LOS is incorrect? because it doesnt state anything about calculations (Im a level 1 candidate btw).
 
As I understood it, the entire curriculum, minus the optional sections, is fair game. The LOS are only supposed to guide you in a general sense.
 
As I noticed in CFA Mocks and on line tests, regarding calculations in Derivatives session, the most common questions are calculating strike, loss/gain on put, call, protective put, covered call etc. There are also some more theorical questions regarding SWAPS and forwards. May we expect something completely different on exam in general (I know that we are prohibited to discuss any exam material) but can we expect similar questionary as on on line mocks or not?
 
OP, do some practice questions to gauge what you need to know.
Something that I’ve noticed with Derivatives is that quite often while the questions don’t require any actual calculation, being able to recall and understand the formulae is paramount e.g. a synthetic long stock position can be produced by buying a fiduciary call, selling a protective put and buying a risk-free pure discount bond.
This relationship is very easy to remember if you just remember the put-call parity formula, but good luck recalling the combinations otherwise.
c + [X / (1 + Rf)^T] = S + p
 
Yes, I finished LOS 57 yesterday and when I looked at LOS 58 n 59, it scared to crap outta me, with all the formulas. etc. etc. I finished derivatives today and 58 is the the hardest section. I dont think we need to solve for the calculations but like ya’ll said it is paramount to remember it. Compared to 58, LOS 59 was pretty simple; “call/ put option” and “covered call/ protective put” have different minimum losses, gains.
Im also finished with Alternative investment. Honestly, I did not spend much time on derivatives or alternative investments, and I am hoping that when I review it, EOC/ other questions, I will get a good grasp of it.
Gotta finish ethics and start working on questions
 
In my opinion you only need to remember 2 equations in derivatives, put call parity and spot price of forward contract.
 
Realistically, if you can remember a formula, you can plug and chug a calculation. Try your best to understand the formula (what does it mean, what does it imply when a given variable changes, which variable has a greater impact, etc), and you’ll have to spend less time actively memorizing it. S2000 often suggests using excel spreadsheets to gain an intuition for formulas (enter your put-call parity in and change certain inputs to see the effect on the call value, for example)– I would suggest following his recommendation.
 
You must log in or register to reply here.
Back
Top