CFA Level 1 – Fixed Income

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Study Session 14: Fixed Income (1)

Reading 42 Fixed-Income Securities: Defining Elements 6 LOSs | 2 Quizzes

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0% Complete 0/6 Steps

Describe basic features of a fixed-income security

Describe content of a bond indenture

Compare affirmative and negative covenants and identify examples of each

Describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities

Describe how cash flows of fixed-income securities are structured

Describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and identify whether such provisions benefit the borrower or the lender

Reading 42 Fixed-Income Securities: Defining Elements – Quiz 1

Reading 42 Fixed-Income Securities: Defining Elements – Quiz 2

Reading 43 Fixed-Income Markets: Issuance, Trading, and Funding 10 LOSs | 2 Quizzes

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Describe classifications of global fixed-income markets

Describe the use of interbank offered rates as reference rates in floating-rate debt

Describe mechanisms available for issuing bonds in primary markets

Describe secondary markets for bonds

Describe securities issued by sovereign governments

Describe securities issued by non-sovereign governments, quasi-government entities, and supranational agencies

Describe types of debt issued by corporations

Describe structured financial instruments

Describe short-term funding alternatives available to banks

Describe repurchase agreements (repos) and the risks associated with them

Reading 43 Fixed-Income Markets: Issuance, Trading, and Funding – Quiz 1

Reading 43 Fixed-Income Markets: Issuance, Trading, and Funding – Quiz 2

Reading 44 Introduction to Fixed-Income Valuation 11 LOSs | 2 Quizzes

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Calculate a bond’s price given a market discount rate

Identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity)

Define spot rates and calculate the price of a bond using spot rates

Describe and calculate the flat price, accrued interest, and the full price of a bond

Describe matrix pricing

Calculate annual yield on a bond for varying compounding periods in a year

Calculate and interpret yield measures for fixed-rate bonds and floating-rate notes

Calculate and interpret yield measures for money market instruments

Define and compare the spot curve, yield curve on coupon bonds, par curve, and forward curve

Define forward rates and calculate spot rates from forward rates, forward rates from spot rates, and the price of a bond using forward rates

Compare, calculate, and interpret yield spread measures

Reading 44 Introduction to Fixed-Income Valuation – Quiz 1

Reading 44 Introduction to Fixed-Income Valuation – Quiz 2

Reading 45 Introduction to Asset-Backed Securities 9 LOSs | 2 Quizzes

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0% Complete 0/9 Steps

Explain benefits of securitization for economies and financial markets

Describe securitization, including the parties involved in the process and the roles they play

Describe typical structures of securitizations, including credit tranching and time tranching

Describe types and characteristics of residential mortgage loans that are typically securitized

Describe types and characteristics of residential mortgage-backed securities, including mortgage pass-through securities and collateralized mortgage obligations, and explain the cash flows and risks for each type

Define prepayment risk and describe the prepayment risk of mortgage-backed securities

Describe characteristics and risks of commercial mortgage-backed securities

Describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and risks of each type

Describe collateralized debt obligations, including their cash flows and risks

Reading 45 Introduction to Asset-Backed Securities – Quiz 1

Reading 45 Introduction to Asset-Backed Securities – Quiz 2

Study Session 15: Fixed Income (2)

Reading 46 Understanding Fixed-Income Risk and Return 12 LOSs | 2 Quizzes

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0% Complete 0/12 Steps

Calculate and interpret the sources of return from investing in a fixed-rate bond

Define, calculate, and interpret Macaulay, modified, and effective durations

Explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options

Define key rate duration and describe the use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve

Explain how a bond’s maturity, coupon, and yield level affect its interest rate risk

Calculate the duration of a portfolio and explain the limitations of portfolio duration

Calculate and interpret the money duration of a bond and price value of a basis point (PVBP)

Calculate and interpret approximate convexity and distinguish between approximate and effective convexity

Estimate the percentage price change of a bond for a specified change in yield, given the bond’s approximate duration and convexity

Describe how the term structure of yield volatility affects the interest rate risk of a bond

Describe the relationships among a bond’s holding period return, its duration, and the investment horizon

Explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes

Reading 46 Understanding Fixed-Income Risk and Return – Quiz 1

Reading 46 Understanding Fixed-Income Risk and Return – Quiz 2

Reading 47 Fundamentals of Credit Analysis 10 LOSs | 2 Quizzes

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Describe credit risk and credit-related risks affecting corporate bonds

Describe default probability and loss severity as components of credit risk

Describe seniority rankings of corporate debt and explain the potential violation of the priority of claims in a bankruptcy proceeding

Distinguish between corporate issuer credit ratings and issue credit ratings and describe the rating agency practice of “notching”

Explain risks in relying on ratings from credit rating agencies

Explain the four Cs (Capacity, Collateral, Covenants, and Character) of traditional credit analysis

Calculate and interpret financial ratios used in credit analysis

Evaluate the credit quality of a corporate bond issuer and a bond of that issuer, given key financial ratios of the issuer and the industry

Describe factors that influence the level and volatility of yield spreads

Explain special considerations when evaluating the credit of high yield, sovereign, and non-sovereign government debt issuers and issues

Reading 47 Fundamentals of Credit Analysis – Quiz 1

Reading 47 Fundamentals of Credit Analysis – Quiz 2

Fixed Income – Exam