Update: On the last topic & a slight setback

It’s been awhile since I updated last (as usual).  Today I have a large upload to complete to get myself caught up to my current state within the curriculum.  I finished corporate finance and derivatives in 3 hard/long days and started FRA about 3 days ago.  Previous research on AnalystForums indicated that the Schweser FRA section was not a good study source, but being I choose to give it a shot.  Unfortunately, it is deceptively easy for the first 4 – 5 readings, after which you realize that you don’t have fundamentals.  So today I completely abandoned Schweser FRA notes for the CFAI book. I still think schweser did a fantastic job with all the other topics, but they really didn’t cover FRA in the same manner.  I don’t even know if that a legitimate request for someone with little accounting knowledge. I got through the first two study sessions on Schweser FRA and found no problems until the material started to use a compounding approach at which point I realized I had a very shotty foundation.  If this was any other topic, I would likely just plow through the remainder and solidify through problems.  However FRA is highly theoretical and not really conceptual at all, not to mention 20% of the exam.  I sat down today and whipped through 2 readings, which in retrospect is quite slow for me, but the chapters are also three to four times as large as a typical schweser reading.

I was actually surprised at the level of depth and knowledge I got by proceeding through every page and every line of the CFAI version.  Unlike some of the other topics which were dragged on but meaningless definitions and countless examples around the same concept, these chapters felt packed with relevance and just the right amount of examples.  After reading through the first two chapters I feel much stronger in quant, with a much broader base to work with.  With that said my goal of being done FRA by the 1st will likely be set back. If I had continued on with Schweser I would have been done tomorrow and on to questions day earlier.  However simply proceeding through the readings for the sake of entering a review process seemed contradictory to the end result.  I had originally planned two weeks for quant and although I don’t think I will take that long in completing, i will likely give myself till may 5th to complete a cumbersome review of the material With that said I am still doing the schweser notes for a more thorough focus after the CFAI readings.  Overall I am considering the strategic placement of FRA as my last topic as a strength, not a weakness.  I consider this entire process a dedicated review to FRA, the largest component of the level 1 exam.  Coming out of this topic I will move on to solidify quant and then some slight revisions to ethics, PM and corporate finance.

If I can nail down the concepts as well as I have been able to today in FRA, I feel very good about the exam.  After reviewing all the other sections I feel very confident in economics, ethics, equity, fixed, derivatives, AI and most of PM.  With that said I still have a lot of work to do in all those sections, including 2 books of schweser mock exams, CFAI mock exams, ethics tests, emptying 1bank, reading SPH and GIPS again, reading secret sauce and solidifying the formulas through repetition.  At this stage in the game a fundamental base in FRA will really help my scores and confidence.  I am going to go watch How I met Your Mother (amazing show) and then I will likely be back for a mass upload.  In case I decide against this, I likely wont be back until I have another late night “second wind”.  Good luck to all who are now well into their review process.

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Whats coming up…..

So I finally got my mass update in and now I am all caught up.  Tomorrow I hope to log in a long day and polish off the final two chapters of Fixed, which look pretty heavy.  With the cross referencing and final review that should take me to Saturday.  UFC is on Saturday as well so I consider that to be a half day.  Sunday I will start derivatives and have that done by Wednesday or Thursday.  The rest of that week will polish off corporate finance.  The following week is dedicated to the final topic FRA, which I saved for last on-purpose.

I will go more into detail about my review process as it comes closer, but for the time being I am trying to shave off days to completion to increase my overall review time. Best case scenario taking in a reasonable progression through the remaining topics, I will be done the curriculum on May 2nd.  Worst case I finish it by the end of that week.  i don’t really mind finishing it later as FRA is so important and I wanted to leave it last so I could take my time progressing through it and getting a really strong grasp of the material.  If I can complete FRA at this level in a full week and be done on the 2nd of may, then I will have 5 weeks for review instead of 4.  I really hope I can do this as I wanted to dedicate a solid 3 -6 days exclusively on mastering quant.  At this point I know I can excel at Ethics, Economics, Equity, most of fixed, AI and Good portion of portfolio management.  With the review process I can lock these in fairly confidently.  The remaining sections I have either not completed, so I don’t know, or I am weak at.  I assume that I will be good in a good portion of FRA and derivatives, and weaker in quant, corporate finance, and few subsections of FRA.  Overall I am feeling like 5 weeks would have me well prepared for the exam, but I could also do it in 4 if need be.

Also the blog will be moving into a more question based format, not so much bullet list like it has been so far.  I plan on doing more posts like this as updates as well as general updates on strength in topics and quiz/exam results.  Until then.

Change in Study Approach

I wanted to take a sec to recap a sudden change I have had in my study approach.  When I drew up my original study plan I was well aware I would constantly be making adjustments, and that has rang true thus far.  Because I had to start so late in the game (3 months) I am now at a point where I am counting days before the exam, not months.  With that being said, I am trying to get through the curriculum in the best possible, with the least time possible.  This has unfortunately led to a lot of exclusion of original study plans.


Change: No more formula notebook

Solution: Schweser summarize the formulas in the back of each note section.  During my review process I will rip out those pages and practice all the formulas.  So my formula notebook will be a collection of ripped out pages, but still have the same information.  Net result is less time, same outcome.


Change: Not reading secret sauce as I progress through the material

Solution: Secret sauce is meant for a final review process, so trying to complete a secondary review immediately after a study session was overkill for my particular situation.  Instead I will read secret sauce during my first review week, and make notes in it throughout my review.  Also I will review the entire secret sauce with the SPH days before the exam.


Change: No sequential cross referencing at every reading.  I noticed one day that if I cut out the cross referencing I could do an additional reading per day, which is a big plus for me.  The cross referencing was to ensure I didn’t miss anything pivotal, but schweser does put the information under each LOS so the likely hood of this happening is reduced.

Solution: If time allows at the end of each topic I will cross reference the entire topic at one time.  I’d like to think of this as my secondary review of the material, but it really just a skim through the sections.


Change: No questions immediately after the review. Some may argue with this point as questions really do help to drive home the material.  I am pro questions 100%, but I also want to get through the curriculum so I can have as much dedicated question and review time as possible.  When I cut out question as well as cross referencing I was able to do a lot more in a day, moving through 3 topics in under a week.

Solution: Not to miss a single question in qbank, schweser, cfai, or any addition mock/sample exams I am able to get ahold of.  By completing the curriculum in a shorter timeframe I will be less stressed about finishing the curriculum.  With that said, I will focus on completing all the questions I have before the end of the exam.  This is non-negotiable, questions are essential to success.


What I haven’t changed is the review of stalla cue cards after the entire topic as well as a review of the quick-sheet.  This just gives me a general exposure to the entire material before I move on.  I have been able to squeeze these at the end of review quite painlessly.  I will also be reviewing the cue cards and quick sheet again during my review process.

Reading 64: Introduction to the Valuation of Debt Securities

SCW: 8 pages

Lessons Learned:

  • Using quant/TVM here to value bonds
  • Price yield profile is perplexing
  • I still don’t understand why we multiply N in zero coupon bonds and why YTM/2 for I/Y!!!???
  • The arbitrage-free valuation approach is pretty basic, applying it shouldn’t be to difficult….try out the example

Reading 63: Understanding Yield Spreads

SCW: 9 pages

Lessons Learned:

  • For once, graphs actually helped clarify something
  • The yield ratio is simply one plus the relative yield spread
  • I need to revisit LIBOR as it isn’t really clarified in my mind enough yet, even though it seems fairly simplistic
  • Preferred habitat theory and the market segmentation theory
  • Importance of spot rates!!!

Reading 62: Overview of Bond Sectors & Instruments

SCW: 16 pages

Lessons Learned:

  • Terminology is still fairly introductory, but interesting
  • Learning how to read t-bond quotes was very interesting
  • Page 55: be careful here, medium-term notes are not necessarily medium-term or notes……ok what……
  • Another chapter packed with definitions
  • I would like to know more about special purpose vehicles in regards to bankruptcy
  • Stripped securities introduced, play a large role later on
  • The combination of the derivative and the note is called a structured security

Reading 61: Risks Associated with Investing in Bonds

SCW: 13 pages

Lessons Learned:

  • Without the CSC/finance in post secondary I think I would be lost in these readings, they assume a certain level of knowledge
  • Significant overlap with the CSC
  • There is an excellent mid-chapter summary in the schweser notes on page 27, Table-F2
  • The CFA goes a step further on why these different types of securities are structured the way they are
  • I thought I read somewhere that duration was hard…..maybe I haven’t hit that yet…..
  • My highlighter death-toll is climbing
  • Bond rating classifications in the CSC helped with this section which is much less detailed
  • Nothing really complex here, lots of talk about general concepts of risk
  • Ginnie mae, fannie mae, freddie mac, sallie mae…….are you kidding me
  • The quality of a debt obligation depends not only on the borrowers ability to repay but also on the borrower’s desire or willingness to repay
  • As long as the required margin above the reference rate exactly compensates for the bond’s risk, the price of a floating rate security will return to par at each reset date