HomeCFACFA Level 3CFA Level 3 | Fixed Income: Derivatives Overlay with Interest Rate Swaps

CFA Level 3 | Fixed Income: Derivatives Overlay with Interest Rate Swaps

  • June 5, 2020
  • Posted by: Fabian Moa, CFA, FRM, CTP, AFM, FMVA, FSA Credential
  • Categories: CFA, CFA Level 3
No Comments

CFA Level 3

Topic: Fixed Income Portfolio Management

Reading: Liability-Driven and Index-Based Strategies

 

In this video, I will go through the derivatives overlay strategy using interest rate swaps to close the duration gap (Hedge ratio = 100%) by calculating the required swap notional.

If Asset BPV < Liability BPV, then the strategy is to use receive-fixed interest rate swaps (Swap BPV > 0) to close the duration gap.

If Asset BPV > Liability BPV, then the strategy is to use pay-fixed interest rate swaps (Swap BPV < 0) to close the duration gap. 

Find out more about the CFA Level 3 exam preparatory courses offered at Noesis. We offer face-to-face tuition classes (lecture and revision/review) in Malaysia and the Blended Online (B/O) mode for candidates from Malaysia, Singapore, and Vietnam.