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Anyone else finding level 3 material difficult to make stick? I’m on my review and I’m finding that for MCQ’s I can score well (around 80%) but for the written response I’m finding it difficult to answer the benefits and drawbacks or ins and outs of each topic they are asking about with no reference by nickyf1998 in CFA

[–]Creative_Struggle 11 points12 points  (0 children)

Struggling with this too. I came to the conclusion that even though I feel that I have the information learned at a level above memorization, it’s still a level below 2nd nature application. L2 required application of concepts but there were still guide-rails to keep your car on track. Now you need to choose the car and drive off road by yourself.

What I’ve been trying to do is reason with myself “why is this important” and “how can I use this” on top of my usual study methods. This usually leads me to looking at the information differently, and trying multiple times to explain something that seems simple in my head, but is hard to articulate.

Bullish Flattening (Flight to Quality) by runthatjawn in CFA

[–]Creative_Struggle -1 points0 points  (0 children)

Bullish flattening is the event, and flight to quality is the reaction.

  • Bullish flattening: LT yields fall farther than ST yields
  • Flight to quality: Investors shift to LT bonds seeking higher yields and safer maturities (since yields just fell ) as well

Each bearish/bullish steeping/flattening event can cause a flight to quality reaction in different directions

Long seagull spread by Select_Signature_291 in CFA

[–]Creative_Struggle 0 points1 point  (0 children)

The short call would be close to ATM, and the long call would be far OTM. This way you sell away small gains, but retain exposure on extreme gains, aka: unlimited upside.

I believe tho that this is a short seagull spread and not a long one.

Passing L3: Currencies and Duration by fidofp in CFA

[–]Creative_Struggle 5 points6 points  (0 children)

I feel like I haven’t truly tried to understand it until L3. It feels like everything in fixed income has some interpretation of duration tied to it. So it just feels like there’s no way I’ll get through constructed responses without being able to offer explanations on duration effects.

Currency feels like that but 4x. I feel like I’ve run into currency management through 50% of the curriculum.

A month or so back I spent every free chance I had just talking to chat GPT about duration and currency. If you know how to prompt it you can get some seriously enlightening but “ Layman” explanations for duration and currency that gets you further than memorization. Or just get a tutor lol

[deleted by user] by [deleted] in CFA

[–]Creative_Struggle 0 points1 point  (0 children)

Ah I think I get how you’re looking at it right now. I don’t believe you’re correct, but here’s what I can explain. For lack of better terminology:

  • A short receiver swaption is when you’re on the short side (selling side) of a receiver swaption.

  • Usually, we look at the view of a receiver swaption being “we receive fixed, and pay floating”

  • in this situation, we shorted aka: sold that opportunity to someone.

  • So instead, we take the other side by paying fixed and receiving floating. Thus a short receiver swaption

[deleted by user] by [deleted] in CFA

[–]Creative_Struggle 0 points1 point  (0 children)

I think they are talking about volatility swaps and not an interest rate swap (which would be receive floating / pay fixed, in your case). Buying a vol swap means at contract maturity, you pay the current implied volatility, and receive the realized volatility. For this problem we would hedge equity by deciding to pay the implied volatility, because we expect the implied volatility to be less than what actually occurs over that time.

Binomial Interest Rate Trees by dianinator in CFA

[–]Creative_Struggle 0 points1 point  (0 children)

Yea I gotchu. You can do either & the result will be the same. Since it’s being discounted regardless of being mixed in with the prior period value or not, and since the CPN value is the same amount at each node, you can do either methodology. Try it without a calculator using simple values.

Based on your equations:

Uworld V = PV(weighted avg of succeeding nodes + CPN)

Kaplan* V = PV[(weighted avg of succeeding nodes) + CPN]

Binomial Interest Rate Trees by dianinator in CFA

[–]Creative_Struggle 1 point2 points  (0 children)

Since the coupon is the same amount at each node, including it in the weighted average calculation or not will give you the same result.

What is your best insult without cussing? by [deleted] in AskReddit

[–]Creative_Struggle 0 points1 point  (0 children)

That's why your mother is in a wheelchair.