Bond basics and key relationships

[Ryan S]

David et al,

This may be a very broad question, but I'm finding myself struggling in some key areas for fixed income. I'd like to get much more comfortable with the following over the next 4 weeks prior to exam date. The general theme for me is relationships between different variables. Any advice, points, past threads, or specific readings would be appreciated. These topics include and certainly not limited to:

-Interest rates above/below coupon rates and how this affects duration, convexity, bond price, yield
-Bond price to yield curve, and how this relates to Cheapest to deliver bonds (short duration/long duration more favorable)
-Slope of the yield curve and its impact on the above
-Impact of maturity on bond prices

The list goes on, but relationships is the operative word. Any help appreciated!

Ryan

 

[David Harper CFA FRM]

Hi @Ryan S

That is broad set of issues ... however, tomorrow (Sat) I am spending a few couple hours writing next week's trivia quiz (this weeks is here https://forum.bionicturtle.com/threads/enter-our-weekly-multiple-choice-trivia-quiz-to-win.7725), which posts I Monday. I could make the topic about this, with a 5-question quiz; it might be helpful to others. I could not be comprehensive in 5 questions, but I might be able to float the key relationship (basically, sort of like I did with value at risk a few weeks ago https://forum.bionicturtle.com/thre...of-march-31st-win-prizes-var-hodgepodge.7688/ ... I was surprised at how "efficiently" we could introduce ~ 50% of testable P1 VaR material). It's all Tuckman, it's just a matter of priority and perspetive, i think.

Sound good? If so, the Q&A there could also start a fresh discussion

cc: @Nicole Manley

 

[Ryan S]

Absolutely this sounds great. Thank you!

 

[Alex_1]

Hi @David Harper CFA FRM CIPM , this would be an absolute great idea! I'm currently starting to panick a bit, I have gone through basically almost all the topics for part 1 and now started to revise topics from T1 and T2 and boy do I have a lot of gaps... I think a "quick-and-dirty" recap of Tuckman topics is really helpful right now. Thanks!

 

[David Harper CFA FRM]

@Alex_1 okay great then! Re: panics, can i just share that "absolute gap" panics are almost always experienced by subsequently passing candidates. If you look at the AIMs, mastery on an absolute (vs relative) and literal (vs conceptual) scale is basically impossible for mortals (or people with less than a fractional lifetime). The exam won't (and cannot physically) ask you about everything on the AIM syllabus. My intention is not to cheer-lead or trivialize with platitude, it is merely to suggest that a focus on "gaps" works up to a good and high point (informing preparation strategy) but, beyond that point, it could drive you crazy as there will always be some gaps relative to the very ambitious syllabus. FWIW But thanks for the encouragement, I am excited about the challenge tomorrow to write a helpful P1 FI quiz!

 

[David Harper CFA FRM]

@Ryan S Nicole just posted the weekly "trivia" @ https://forum.bionicturtle.com/thre...via-contest-and-win-fixed-income-basics.7743/
when I worked on these Saturday (including reviewing the historical FRM question base), I realized that the "relationship" issues depended on basic ideas so I thought it would be useful to break this up into two quizzes: this week's is candidly more testable (I didn't want to skip some key testable ideas), then on a subsequent quiz (eg, next week) I can do into some "intermediate" relationships which are more complicated, more diverse and less testable, I hope that makes sense! Thanks,

 

[Ryan S]

Makes perfect sense. So far so good on numbers 2 and 3, but questions 3 and 4 are the types that are sticking points for me! I don't know why I'm struggling, but I'm going to buckle down on these. Thanks for this David.