Level II

Access to all Level II articles until the next Level II exam date

No discussion of conservative methods vs. aggressive methods would be complete without a clear definition of what we mean by these two categories of methods.  Therefore, let’s start there: Conservative accounting methods are those that report lower net income in the current period, and (potentially) higher net income in future periods. Aggressive accounting methods are […]

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Various interest rate derivatives are, in fact, equivalent to each other; i.e., they can be structured to generate equivalent (though not necessarily identical) cash flows.  This article will explain how these derivatives can be structured to be equivalent to each other. First note that you will not be asked on an exam to create equivalent […]

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After reading a number of posts on AnalystForum in which candidates have had difficulty with linear interpolation or extrapolation, I figured it was time to write an article on the subject.  At Level I it applies to binomial trees for calculating the weights for equity options, and for combining risky portfolios with the risk-free asset […]

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If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership, CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership, CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership, CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership, CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership, CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership, CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

Interest rate caps and floors are, essentially, collections of interest rate options: each option has a positive payoff when it expires in the money and a zero payoff when it expires out of the money.  The individual options are called, respectively, caplets and floorlets. Note that caps and floors are commonly based on LIBOR or […]

This article is for members only.  You can become a member now by purchasing a

CFA® Level II Membership, CFA® Level II Derivatives Membership

This will give you access to this and all other articles at that membership level.