Friday, April 25, 2008
OK, maybe they don't totally suck
I don't know what it's been but I've been doing a really good job with studying this time around. I finished futre and forwards, which is half of the derivative material, and I am in pretty good shape. I still have to do options which will be harder, but I am pretty solid on forwards and futures. If I can do options and swaps as well as the rest then I should be able to do some damage on the derivative portion of the exam. Who knows it may even become a strength.
Tuesday, April 22, 2008
Derivatives Suck
In the past, there has always been a part of the exam that I had trouble with and tried to over compensate in other areas. Last year I found derivatives to be that area. Truth be told, Derivatives were tough at level 1, but level 2 is an absolute beast. Some level 2 candidates say they don't find derivatives to be the toughest part of the exam. As far as I'm concerned unless you work with them in your job it is the toughest part of the cirriculum or you are on drugs.
Anyway, as you can see, I am working on derivatives right now. This should be about 10% of the exam and it will be hard to pass without getting at least half of this section correct. This is the only section of the exam that I have trouble following conceptually. I know what derivatives are, but valuing them and exploiting arbitrage opportunities at this level has proven hard for me. Right now I am finishing up futures and forwards - both of which I am minimally prepared for. I still have some conceptual problems, but I can value and price them pretty well. Next I go to swaps and options. Last year, I found them to be painful. My performance on derivatives will be the primary determinant of whether or not I pass. The maximum passing score is 70%, though in practice it will probably be closer to 65% or less. Ethics will be 3 or 4 item sets and I will get about 60% of that. Most other areas I should get about 70% - more if I do well. However, the 2 item sets on derivatives could sink me if I don't get at least half right. I will be reviewing heavily over the coming days and probably have an update next week.
Anyway, as you can see, I am working on derivatives right now. This should be about 10% of the exam and it will be hard to pass without getting at least half of this section correct. This is the only section of the exam that I have trouble following conceptually. I know what derivatives are, but valuing them and exploiting arbitrage opportunities at this level has proven hard for me. Right now I am finishing up futures and forwards - both of which I am minimally prepared for. I still have some conceptual problems, but I can value and price them pretty well. Next I go to swaps and options. Last year, I found them to be painful. My performance on derivatives will be the primary determinant of whether or not I pass. The maximum passing score is 70%, though in practice it will probably be closer to 65% or less. Ethics will be 3 or 4 item sets and I will get about 60% of that. Most other areas I should get about 70% - more if I do well. However, the 2 item sets on derivatives could sink me if I don't get at least half right. I will be reviewing heavily over the coming days and probably have an update next week.
Monday, April 7, 2008
Crunch Time
Frequently in the past, I have had trouble focusing during certain stretches of preparation. There have been weeks where I had scheduled myself to go learn a certain subject, but I just haven't been able to concentrate enough to learn the material. This time has been different. Maybe it has to do with having a new baby. Maybe it has to do with some recent changes at work. Whatever it is, I am getting a lot of studying done this time around. I'll describe last week for example. My normal studying is at home during lunch (up to 45 minutes), and an hour or so at home after work except for Thursdays (home alone with the baby). Charitably, that's 2 hours a day. However, I am taking an online course to help prepare, and that course is 3 hours per week. Also, at work I have been working a lot of practice questions lately. I conservatively estimate I did at least 3 hours of practice questions while at work last week. Also, 2 days last week I did some extra practice questions after dinner. All told I did about 17 hours plus between Monday and Friday of last week. In the past that would leave me feeling burned out. This time it was a warm up for the weekend.
Saturday morning I did an online practice exam offered by the CFAI (the people who administer the real exam). I got 60%. I wanted at least 70%. I wasn't pleased with the score, but I was satisfied overall with my performance. The thing is, that the test was 5 item sets. 1 each for ethics, statistics, and economics. I got 50% on each of those. I was pleased with that because these are areas I haven't even looked at since February. I was able to remember half the stuff from nearly 2 months ago before even reviewing any formulas. There was also an item set from statement analysis where I did 3 of 6 and an item set on equity valuation where I got 5 of 6. I spent another 90 minutes reviewing what I missed in statement analysis. Then, after dinner I did the next reading so that I would stay on schedule. Long story short, I got in some 7 hours of prep over the weekend. I don't get that much in most weeks, but I have been somewhat enjoying this over the last few weeks and I don't want to lose a good thing.
Saturday morning I did an online practice exam offered by the CFAI (the people who administer the real exam). I got 60%. I wanted at least 70%. I wasn't pleased with the score, but I was satisfied overall with my performance. The thing is, that the test was 5 item sets. 1 each for ethics, statistics, and economics. I got 50% on each of those. I was pleased with that because these are areas I haven't even looked at since February. I was able to remember half the stuff from nearly 2 months ago before even reviewing any formulas. There was also an item set from statement analysis where I did 3 of 6 and an item set on equity valuation where I got 5 of 6. I spent another 90 minutes reviewing what I missed in statement analysis. Then, after dinner I did the next reading so that I would stay on schedule. Long story short, I got in some 7 hours of prep over the weekend. I don't get that much in most weeks, but I have been somewhat enjoying this over the last few weeks and I don't want to lose a good thing.
Wednesday, April 2, 2008
How do you get one?
To get the charter is not too complicated. The rules are very simple. First there are three exams, which must be passed sequentially. Second, you need at least a Bachelor's degree. Finally, you need 3 years of experience in finance. The exams must be taken and passed sequentially, and you need the Bachelor's degree before you take (but not necessarily enroll) for the first exam. Sound simple right? Not even close. As I have said before, it really is a quest.
Imagine you are in college. You go to class on the first day. The teacher gives you the text, and tells you the learn the first 5 chapters. Then tells you the final is on day X. Then the teacher leaves the room and you don't see him until the final exam. Now imagine if every teacher did that. Now imagine if all of your teachers got together and decided to combine their exams in to one giant super exam. That in many ways is a CFA exam. The cirriculum is based on several subjects. Ethics, statistics, economics, financial statement analysis, corporate finance, equity valuation, bond valuation, financial derivatives, and portfolio management. The cirriculum is presented in 5 texts, which should be read from cover to cover to be prepared for everything. That's the worst part of the cirriculum. I read over 100 pages of material for statistics for the level 2 exam, and they ask me 6 multiple choice questions. At most these questions can cover about half of the statistics material.
The level 1 exam is 240 questions all multiple choice. If you pass that, level 2 is item set. They give you a page of information. They ask you 6 multiple questions for each page of info. That is an item set. The level 2 exam is 20 item sets for a total of 120 questions. The level 3 exam is 10 items in the same format as level 2 and several essay questions. Each exam is 3 hours in the morning, a two hour lunch break, and 3 hours in the afternoon. The level 1 exam is offered on the first Saturday in December and June. The level 2 and 3 exam is offered on the first Saturday in June only. It takes about 50 days to get the results from level 1 and about 80 days for level 2 and 3. That means if you take level 2, you won't find out until the middle of August if you passed, and if you don't you must wait until June to take it again. That is where I am.
It took me 3 tries to pass level 1, and I already failed level 2 once. I am in the middle to studying again, but this time I am getting help. If you ever took the SAT in high school, then you know Kaplan offers study aids to improve your performance. Kaplan has a subsidiary named Schweser that does the same for the CFA exam. I actually do an online class with them that I think has helped me a lot. I'll go into more detail about my study schedule in a later post.
Imagine you are in college. You go to class on the first day. The teacher gives you the text, and tells you the learn the first 5 chapters. Then tells you the final is on day X. Then the teacher leaves the room and you don't see him until the final exam. Now imagine if every teacher did that. Now imagine if all of your teachers got together and decided to combine their exams in to one giant super exam. That in many ways is a CFA exam. The cirriculum is based on several subjects. Ethics, statistics, economics, financial statement analysis, corporate finance, equity valuation, bond valuation, financial derivatives, and portfolio management. The cirriculum is presented in 5 texts, which should be read from cover to cover to be prepared for everything. That's the worst part of the cirriculum. I read over 100 pages of material for statistics for the level 2 exam, and they ask me 6 multiple choice questions. At most these questions can cover about half of the statistics material.
The level 1 exam is 240 questions all multiple choice. If you pass that, level 2 is item set. They give you a page of information. They ask you 6 multiple questions for each page of info. That is an item set. The level 2 exam is 20 item sets for a total of 120 questions. The level 3 exam is 10 items in the same format as level 2 and several essay questions. Each exam is 3 hours in the morning, a two hour lunch break, and 3 hours in the afternoon. The level 1 exam is offered on the first Saturday in December and June. The level 2 and 3 exam is offered on the first Saturday in June only. It takes about 50 days to get the results from level 1 and about 80 days for level 2 and 3. That means if you take level 2, you won't find out until the middle of August if you passed, and if you don't you must wait until June to take it again. That is where I am.
It took me 3 tries to pass level 1, and I already failed level 2 once. I am in the middle to studying again, but this time I am getting help. If you ever took the SAT in high school, then you know Kaplan offers study aids to improve your performance. Kaplan has a subsidiary named Schweser that does the same for the CFA exam. I actually do an online class with them that I think has helped me a lot. I'll go into more detail about my study schedule in a later post.
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