Level III Derivatives

Access to all Level III derivatives articles until the next Level III exam date

What do we mean by “currency management”? In a nutshell, we mean managing (i.e., adjusting) our exposure to changes in currency exchange rates. We might, for example, Hedge 100% (or as close to 100% as we can get) of our exposure to exchange rates (that exposure arising from existing investments in securities denominated in currencies […]

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

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

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

The option Greeks – delta, gamma, theta, vega, and rho – refer to sensitivities of the price of an option to various underlying variables.  Here, we’ll be talking about options on stocks, though the discussion would be equally appropriate for options on, say, commodities.  It would not be appropriate for a discussion of options on […]

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

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

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

Let’s start by addressing the elephant in the room: the name “FX swap” is just plain weird.  This isn’t a swap in any normal sense of the word swap: it isn’t an exchange of cash flows at some predetermined future date(s).  An FX swap is nothing more nor less than rolling over an expiring currency […]

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

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

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

Variance swaps more closely resemble forward contracts – or forward rate agreements (FRAs) – than they do swaps (e.g., plain vanilla interest rate swaps, or equity swaps).  Whereas most swaps have more than one payment, variance swaps (and forwards, and FRAs) have a single payment.  However, given the penchant of finance folks to ascribe inaccurate […]

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

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

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