Derivatives

The seventh subject in CFA Level-1 Exam is Derivatives. It has a weightage of 6%. A derivative is type of a security with a price that is dependent upon or derived from one or more underlying assets. It is a contract between two or more parties based upon the assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies. Common types of derivative include Collateralized debt obligations (CDOs, Credit default swaps, Forwards, Futures, Mortgage-backed securities (MBS), Options, Swaps.

The topics covered in this subject are:

• Types of Derivative Instruments and their characteristics,
• Markets and Valuation of Forwards and Futures Contracts,
• Options Markets and Valuation of Option Contracts,
• Swaps Markets and Valuation of Swap Contracts,
• Credit Derivatives Markets and Instruments, and
• Uses of Derivatives in Portfolio Management.

• Fixed Income /
• Alternative Investments