Derivative Markets and Instruments (2021 Level I CFA® Exam - Reading 45)

[@janetzi4374]

Thank you so much professor James Forjan. The video is well structured and organized! I love your example, this is so helpful to understand this complex abstract concept! Love it and thank you so much to spend time and effort to make these videos and share on KZbin. I will share with my friends who will do CFA and also want to understand finance concept!

[@analystprep]

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[@Chennnnnnn01]

Thank you so much for the online lessons. I find it very helpful. Getting prepared to take the exam this June.

[@analystprep]

You're welcome! Good luck with the exam. Remember to practice as much as you can!

[@natavanvaliyeva5114]

You have passed?🙈

[@miguelangelcarmonagomez2740]

The best summary found ever! Thank you very much.

[@analystprep]

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[@alishaagarwal5993]

Thank you so much for the videos! They are helpful and precise.

[@analystprep]

Glad it was helpful! If you like our video lessons, it would be helpful if you could take 2 minutes of your time to leave us a review here: www.trustpilot.com/review/analystprep.com

[@AlexPerez-ds7hl]

Thank you so much, I just started this week and i feel a litlle bit stress with some concepts, thanks for your job, I love you more than my father hahahahaha

[@juliafrancisco3334]

Thank you so much for the video, this is really helpful! I just wanted to confirm if this is for the 2019 or 2020 CFA material?

[@analystprep]

Hi. This is for the 2020 version of the curriculum. There have been very slight changes in this topic for the 2020 version.

[@alicezhang4414]

thank you this is great!

[@analystprep]

You're welcome!

[@harounhammadi4234]

You are my favourite

[@gauravrathor1656]

Thank you sir...🙏🙏🙏🙏

[@analystprep]

Most welcome!

[@OnlyloveandGod]

You didn’t talk about credit derivatives, pls why? Or did I miss it?

[@analystprep]

At 10:17, we do cover swaps and at 13:07 we talk about asset-backed securities. This is mostly what you need to know so we don't spend too much time on this descriptive chapter. However, here is further information on credit derivatives: Credit Derivatives A credit derivative provides credit protection for the buyer in the event of loss from a credit event. There are a number of types of credit derivatives: 1. Total return swap The underlying is typically a loan or a bond. The credit protection buyer pays the credit protection seller the total return on the bond (interest plus capital) in return for a fixed or floating rate of interest. If the bond defaults, the credit protection seller must continue to pay the interest while receiving no (or very little) return from the buyer. 2. Credit spread option The underlying is the yield spread between the yield on a bond and the yield of benchmark default-free bond. This yield spread, or credit spread, is a reflection of investors’ perception of credit risk. The credit protection buyer selects the strike spread and pays an option premium to the seller. At expiration, the spread is compared with the strike spread and if the option is in-the-money, the seller pays the buyer the determined payoff. 3. Credit-linked note The credit protection buyer will hold a bond that may be subject to default and in order to offset that risk, issues a credit-linked note with the condition that if the bond defaults, the principal payoff is reduced accordingly. The buyer of the credit-linked note takes on the credit risk of the underlying bond. 4. Credit default swap (CDS) The credit protection buyer makes a series of regularly scheduled payments to the credit protection seller. The seller makes no payments until a credit event occurs. A credit event could be a declaration of bankruptcy, a failure to make a scheduled payment or a restructuring. The CDS contract will define what constitutes a credit event. A CDS is essentially a form of insurance and provides loss coverage in return the premium paid by the buyer to the seller.

[@alaataktokani8884]

thank u sir !!

[@analystprep]

You're welcome!