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CFA level 1 exam book 4 (2025) | CFA level 1

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Ready to conquer the CFA Level 1 Exam? In our latest video, we dive deep into CFA Level 1 Exam Book 2 (2025 edition), unpacking essential concepts and crucial tips to ace your exam! Whether you're a first-time candidate or looking to brush up on your skills, this video is your go-to resource. Join us as we explore key topics, share study strategies, and give insights into the CFA exam format. Don't miss out on expert advice that can boost your confidence. Click play, start studying smarter, and don’t forget to like and subscribe for more CFA content! #CFA #CFALevel1 #Finance

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,Book 4: Fixed Income and Derivatives

SchweserNotes™ 2024
Level I CFA®

,SCHWESERNOTES™ 2024 LEVEL I CFA® BOOK 4: FIXED INCOME AND DERIVATIVES
©2023 Kaplan, Inc. All rights reserved.
Published in 2023 by Kaplan, Inc.

ISBN: 978-1-0788-3541-1




These materials may not be copied without written permission from the author. The
unauthorized duplication of these notes is a violation of global copyright laws and the CFA
Institute Code of Ethics. Your assistance in pursuing potential violators of this law is greatly
appreciated.



Required CFA Institute Disclaimer: “Kaplan Schweser is a CFA Institute Prep Provider. Only CFA
Institute Prep Providers are permitted to make use of CFA Institute copyrighted materials which
are the building blocks of the exam. We are also required to create / use updated materials every
year and this is validated by CFA Institute. Our products and services substantially cover the
relevant curriculum and exam and this is validated by CFA Institute. In our advertising, any
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and services offered by Kaplan Schweser. CFA Institute®, CFA® and “Chartered Financial Analyst®”
are trademarks owned by CFA Institute.”
Certain materials contained within this text are the copyrighted property of CFA Institute. The
following is the copyright disclosure for these materials: “© Copyright CFA Institute”.
Disclaimer: The Schweser study tools should be used in conjunction with the original readings as
set forth by CFA Institute. The information contained in these study tools covers topics contained
in the readings referenced by CFA Institute and is believed to be accurate. However, their accuracy
cannot be guaranteed nor is any warranty conveyed as to your ultimate exam success. The
authors of the referenced readings have not endorsed or sponsored these study tools.

, CONTENTS
Learning Outcome Statements (LOS)

FIXED INCOME
READING 49
Fixed-Income Instrument Features
Module 49.1: Fixed-Income Instrument Features
Key Concepts
Answer Key for Module Quizzes

READING 50
Fixed-Income Cash Flows and Types
Module 50.1: Fixed-Income Cash Flows and Types
Key Concepts
Answer Key for Module Quizzes

READING 51
Fixed-Income Issuance and Trading
Module 51.1: Fixed-Income Issuance and Trading
Key Concepts
Answer Key for Module Quizzes

READING 52
Fixed-Income Markets for Corporate Issuers
Module 52.1: Fixed-Income Markets for Corporate Issuers
Key Concepts
Answer Key for Module Quizzes

READING 53
Fixed-Income Markets for Government Issuers
Module 53.1: Fixed-Income Markets for Government Issuers
Key Concepts
Answer Key for Module Quizzes

READING 54
Fixed-Income Bond Valuation: Prices and Yields
Module 54.1: Fixed-Income Bond Valuation: Prices and Yields
Key Concepts
Answer Key for Module Quizzes

READING 55

Table of contents

  1. 01 Learning Outcome Statements (LOS) 9
  2. 02 Reading 49 Fixed-Income Instrument Features 14
    1. Module 49.1: Fixed-Income Instrument Features 14
    2. Key Concepts 18
    3. Answer Key for Module Quizzes 19
  3. 03 Reading 50 Fixed-Income Cash Flows and Types 20
    1. Module 50.1: Fixed-Income Cash Flows and Types 20
    2. Key Concepts 27
    3. Answer Key for Module Quizzes 28
  4. 04 Reading 51 Fixed-Income Issuance and Trading 30
    1. Module 51.1: Fixed-Income Issuance and Trading 30
    2. Key Concepts 35
    3. Answer Key for Module Quizzes 36
  5. 05 Reading 52 Fixed-Income Markets for Corporate Issuers 38
    1. Module 52.1: Fixed-Income Markets for Corporate Issuers 38
    2. Key Concepts 45
    3. ANSWER KEY FOR MODULE QUIZZES 46
  6. 06 Reading 53 Fixed-Income Markets for Government Issuers 48
    1. Module 53.1: Fixed-Income Markets for Government Issuers 48
    2. Key Concepts 51
    3. Answer Key for Module Quizzes 52
  7. 07 Reading 54 Fixed-Income Bond Valuation: Prices and Yields 54
    1. Module 54.1: Fixed-Income Bond Valuation: Prices and Yields 54
    2. Key Concepts 61
    3. Answer Key for Module Quizzes 62
  8. 08 Reading 55 Yield and Yield Spread Measures for Fixed-Rate Bonds 64
    1. Module 55.1: Yield and Yield Spread Measures for Fixed-Rate Bonds 64
    2. Key Concepts 71
    3. Answer Key for Module Quizzes 72
  9. 09 Reading 56 .Yield and Yield Spread Measures for Floating-Rate Instruments 73
    1. Module 56.1: Yield and Yield Spread Measures for Floating-Rate Instruments 73
    2. Key Concepts 76
    3. Answer Key for Module Quizzes 77
  10. 10 Reading 57 The Term Structure of Interest Rates: Spot, Par, and Forward Curves 78
    1. Module 57.1: The Term Structure of Interest Rates: Spot, Par, and Forward Curves 78
    2. Key Concepts 86
    3. Answer Key for Module Quizzes 86
  11. 11 Reading 58 Interest Rate Risk and Return 88
    1. Module 58.1: Interest Rate Risk and Return 88
    2. Key Concepts 95
    3. Answer Key for Module Quizzes 96
  12. 12 Reading 59 Yield-Based Bond Duration Measures and Properties 97
    1. Module 59.1: Yield-Based Bond Duration Measures and Properties 97
    2. Key Concepts 101
    3. Answer Key for Module Quizzes 102
  13. 13 Reading 60 Yield-Based Bond Convexity and Portfolio Properties 103
    1. Module 60.1: Yield-Based Bond Convexity and Portfolio Properties 103
    2. Key Concepts 108
    3. Answer Key for Module Quizzes 109
  14. 14 Reading 61 Curve-Based and Empirical Fixed-Income Risk Measures 111
    1. Module 61.1: Curve-Based and Empirical Fixed-Income Risk Measures 111
    2. Key Concepts 116
    3. Answer Key for Module Quizzes 117
  15. 15 Reading 62 Credit Risk 118
    1. Module 62.1: Credit Risk 118
    2. Key Concepts 126
    3. Answer Key for Module Quizzes 127
  16. 16 Reading 63 Credit Analysis for Government Issuers 129
    1. Module 63.1: Credit Analysis for Government Issuers 129
    2. Key Concepts 131
    3. Answer Key for Module Quizzes 131
  17. 17 Reading 64 Credit Analysis for Corporate Issuers 133
    1. Module 64.1: Credit Analysis for Corporate Issuers 133
    2. Key Concepts 138
    3. Answer Key for Module Quizzes 139
  18. 18 Reading 65 Fixed-Income Securitization 140
    1. Module 65.1: Fixed-Income Securitization 140
    2. Key Concepts 143
    3. Answer Key for Module Quizzes 144
  19. 19 Reading 66 Asset-Backed Security (ABS) Instrument and Market Features 145
    1. Module 66.1: Asset-Backed Security (ABS) Instrument and Market Features 145
    2. Key Concepts 150
    3. Answer Key for Module Quizzes 151
  20. 20 Reading 67 Mortgage-Backed Security (MBS) Instrument and Market Features 152
    1. Module 67.1: Mortgage-Backed Security (MBS) Instrument and Market Features 152
    2. Key Concepts 159
    3. Answer Key for Module Quizzes 161
  21. 21 Topic Quiz: Fixed Income 162
  22. 22 Reading 68 Derivative Instrument and Derivative Market Features 163
    1. Module 68.1: Derivatives Markets 163
    2. Key Concepts 168
    3. Answer Key for Module Quizzes 169
  23. 23 Reading 69 Forward Commitment and Contingent Claim Features and Instruments 170
    1. Module 69.1: Forwards and Futures 170
    2. Module 69.2: Swaps and Options 172
    3. Key Concepts 178
    4. Answer Key for Module Quizzes 179
  24. 24 Reading 70 Derivative Benefits, Risks, and Issuer and Investor Uses 180
    1. Module 70.1: Uses, Benefits, and Risks of Derivatives 180
    2. Key Concepts 184
    3. Answer Key for Module Quizzes 184
  25. 25 Reading 71 Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives 186
    1. Module 71.1: Arbitrage, Replication, and Carrying Costs 186
    2. Key Concepts 191
    3. Answer Key for Module Quizzes 191
  26. 26 Reading 72 Pricing and Valuation of Forward Contracts and for an Underlying with Varying Maturities 193
    1. Module 72.1: Forward Contract Valuation 193
    2. Key Concepts 196
    3. Answer Key for Module Quizzes 196
  27. 27 Reading 73 Pricing and Valuation of Futures Contracts 198
    1. Module 73.1: Futures Valuation 198
    2. Key Concepts 200
    3. Answer Key for Module Quizzes 201
  28. 28 Reading 74 Pricing and Valuation of Interest Rates and Other Swaps 202
    1. Module 74.1: Swap Valuation 202
    2. Key Concepts 204
    3. Answer Key for Module Quizzes 204
  29. 29 Reading 75 Pricing and Valuation of Options 206
    1. Module 75.1: Option Valuation 206
    2. Key Concepts 212
    3. Answer Key for Module Quizzes 213
  30. 30 Reading 76 Option Replication Using Put–Call Parity 214
    1. Module 76.1: Put-Call Parity 214
    2. Key Concepts 217
    3. Answer Key for Module Quizzes 217
  31. 31 Reading 77 Valuing a Derivative Using a One-Period Binomial Model 218
    1. Module 77.1: Binomial Model for Option Values 218
    2. Key Concepts 222
    3. Answer Key for Module Quizzes 223
  32. 32 Topic Quiz: Derivatives 224
  33. 33 Appendix 225
  34. 34 Formulas 229
  35. 35 Index 230

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