Having finished the two equity study sessions, we only need to work through the two fixed income sessions and the final combined derivatives and alternative investments session before we are through the entire curriculum.
The week to come:
The fixed income topic area is divided into two separate study sessions. The first study session (that we are studying this week) covers basic fixed income concepts, as a lead in to the second study session that gets more involved with fixed income analysis and valuation. The first reading (34 pages) introduces the basic features of fixed income instruments (coupon rates, covenants, embedded options etc.). The second reading (40 pages) explores the many different sources of fixed income risk (interest rate-, credit-, liquidity-, sovereign risk etc.). The third reading (56 pages) provides an overview of different bond sectors and instruments (everything from sovereign bonds to collateralized debt obligations, CDOs). The last reading (38 pages) deals with spreads (credit spreads, swap spreads etc.).
Tip:
As discussed for many of the other topic areas the number of LOS and end of chapter questions in each reading do not reflect the number of pages in each reading. E.g. the 3rd reading in this study session has got more than 5 times as many end of chapter questions as the 2nd reading, even though the reading is only 16 pages longer. This may just be a coincidence, and there is no guarantee that this relationship will be reflected on the exam, but it’s definitely worthwhile taking the time to feel at home in the 3rd reading (overview of bond sectors & instruments).
The below study approach should be ingrained in your process by now, but as a reminder:
- Please ensure that you attempt the end of chapter questions as the first thing when going through each reading. As you answer the questions make a list of the most difficult ones (especially whenever you resort to guessing). When you are done with the questions, review your answers thoroughly (particularly those that you got wrong) and add these questions to your list as well.
- Also please ensure that you write down and answer the LOS as you work your way through each reading. The combined effort of question practice and LOS statement “hunting” will ensure that you are focused on seeking out the most important information as you progress through each reading.
- Lastly as you wrap up each reading attempt only the challenging end of chapter questions from your list. Remove those answers that you can now confidently answer correctly from the list, and if there are any questions left read the explanations thoroughly before you redo them. Continue this process until you have mastered all of the end of chapter questions in the reading. Save away the full list of difficult questions for future use in the revision process.