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Book 3: Derivatives, Risk Management,
and Ethical and Professional Standards
SchweserNotes™ 2025
Level III CFA®
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SCHWESERNOTES™ 2025 LEVEL III CFA® BOOK 3: DERIVATIVES, RISK MANAGEMENT, AND ETHICAL AND
PROFESSIONAL STANDARDS
©2024 Kaplan, Inc. All rights reserved.
Published in 2024 by Kaplan, Inc.
ISBN: 978-1-0788-4681-3
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 statement about
the numbers of questions in our products and services relates to unique, original, proprietary
questions. CFA Institute Prep Providers are forbidden from including CFA Institute official mock exam
questions or any questions other than the end of reading questions within their products and
services.
CFA Institute does not endorse, promote, review or warrant the accuracy or quality of the product 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.
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CONTENTS
Learning Outcome Statements (LOS)
DERIVATIVES AND RISK MANAGEMENT
READING 16
Options Strategies
Exam Focus
Module 16.1: Options Basics—Value at Expiration and Profit at Expiration
Module 16.2: Synthetic Positions Using Options
Module 16.3: Covered Calls
Module 16.4: Protective Puts
Module 16.5: Options as a Hedge of a Short Position
Module 16.6: Collars
Module 16.7: Straddles
Module 16.8: Spreads
Module 16.9: Delta and Gamma
Module 16.10: Theta and Vega
Module 16.11: Volatility Skew and Smile
Module 16.12: Applications
Key Concepts
Answer Key for Module Quizzes
READING 17
Swaps, Forwards, and Futures Strategies
Exam Focus
Module 17.1: Managing Interest Rate Risk—Interest Rate Swaps, Forward Rate
Agreement, and Interest Rate Futures
Module 17.2: Managing Currency Exposure
Module 17.3: Managing Equity Risk
Module 17.4: Derivatives on Volatility
Module 17.5: Uses of Derivatives in Portfolio Management
Key Concepts
Answer Key for Module Quizzes
READING 18
Currency Management: An Introduction
Exam Focus
Module 18.1: Managing Currency Exposure
Module 18.2: Active Strategies: Fundamentals and Technical Analysis
Module 18.3: Active Strategies: Carry and Volatility Trading
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Book 3: Derivatives, Risk Management,
and Ethical and Professional Standards
SchweserNotes™ 2025
Level III CFA®
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,VvK VvK
SCHWESERNOTES™ 2025 LEVEL III CFA® BOOK 3: DERIVATIVES, RISK MANAGEMENT, AND ETHICAL AND
PROFESSIONAL STANDARDS
©2024 Kaplan, Inc. All rights reserved.
Published in 2024 by Kaplan, Inc.
ISBN: 978-1-0788-4681-3
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 statement about
the numbers of questions in our products and services relates to unique, original, proprietary
questions. CFA Institute Prep Providers are forbidden from including CFA Institute official mock exam
questions or any questions other than the end of reading questions within their products and
services.
CFA Institute does not endorse, promote, review or warrant the accuracy or quality of the product 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.
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CONTENTS
Learning Outcome Statements (LOS)
DERIVATIVES AND RISK MANAGEMENT
READING 16
Options Strategies
Exam Focus
Module 16.1: Options Basics—Value at Expiration and Profit at Expiration
Module 16.2: Synthetic Positions Using Options
Module 16.3: Covered Calls
Module 16.4: Protective Puts
Module 16.5: Options as a Hedge of a Short Position
Module 16.6: Collars
Module 16.7: Straddles
Module 16.8: Spreads
Module 16.9: Delta and Gamma
Module 16.10: Theta and Vega
Module 16.11: Volatility Skew and Smile
Module 16.12: Applications
Key Concepts
Answer Key for Module Quizzes
READING 17
Swaps, Forwards, and Futures Strategies
Exam Focus
Module 17.1: Managing Interest Rate Risk—Interest Rate Swaps, Forward Rate
Agreement, and Interest Rate Futures
Module 17.2: Managing Currency Exposure
Module 17.3: Managing Equity Risk
Module 17.4: Derivatives on Volatility
Module 17.5: Uses of Derivatives in Portfolio Management
Key Concepts
Answer Key for Module Quizzes
READING 18
Currency Management: An Introduction
Exam Focus
Module 18.1: Managing Currency Exposure
Module 18.2: Active Strategies: Fundamentals and Technical Analysis
Module 18.3: Active Strategies: Carry and Volatility Trading
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