2025 CFA© Program Curriculum Level 3 Core Volume 4 - DERIVATIVES AND RISK MANAGEMENT

How to Use the CFA Program Curriculum
	CFA Institute Learning Ecosystem (LES)
		Designing Your Personal Study Program
		Errata
		Other Feedback
Derivatives and Risk Management
	Learning Module 1	Options Strategies
		Introduction
		Position Equivalencies
			Synthetic Forward Position
			Synthetic Put and Call
		Covered Calls and Protective Puts
			Investment Objectives of Covered Calls
		Investment Objectives of Protective Puts
			Loss Protection/Upside Preservation
			Profit and Loss at Expiration
		Equivalence to Long Asset/Short Forward Position
			Writing Puts
		Risk Reduction Using Covered Calls and Protective Puts
			Covered Calls
			Protective Puts
			Buying Calls and Writing Puts on a Short Position
		Spreads and Combinations
			Bull Spreads and Bear Spreads
		Straddle
			Collars
			Calendar Spread
		Implied Volatility and Volatility Skew
		Investment Objectives and Strategy Selection
			The Necessity of Setting an Objective
			Criteria for Identifying Appropriate Option Strategies
		Options in Portfolio Management
			Covered Call Writing
			Put Writing
			Long Straddle
			Collar
			Calendar Spread
		Hedging an Expected Increase in Equity Market Volatility
			Establishing or Modifying Equity Risk Exposure
		Summary
		Practice Problems
		Solutions
	Learning Module 2	Swaps, Forwards, and Futures Strategies
		Managing Interest Rate Risk with Swaps
			Changing Risk Exposures with Swaps, Futures, and Forwards
		Managing Interest Rate Risk with Forwards and Futures
			Fixed-Income Futures
		Managing Currency Exposure
			Currency Swaps
			Currency Forwards and Futures
		Managing Equity Risk
			Equity Swaps
			Equity Forwards and Futures
			Cash Equitization
		Volatility Derivatives: Futures and Options
			Volatility Futures and Options
		Volatility Derivatives: Variance Swaps
		Using Derivatives in Asset Allocation
			Solution:
			Cash Equitization
		Using Derivatives in Asset Allocation
			Changing Allocations between Asset Classes Using Futures
			Rebalancing an Asset Allocation Using Futures
			Changing Allocations between Asset Classes Using Swaps
		Using Derivatives to Infer Market Expectations
			Using Fed Funds Futures to Infer the Expected Average Federal Funds Rate
			Inferring Market Expectations
		Summary
		Practice Problems
		Solutions
	Learning Module 3	Currency Management: An Introduction
		Introduction
		Foreign Exchange Concepts
			Spot Markets
			Forward Markets
			FX Swap Markets
			Currency Options
		Currency Risk and Portfolio Risk and Return
			Return Decomposition
			Volatility Decomposition
		Strategic Decisions in Currency Management
			The Investment Policy Statement
			The Portfolio Optimization Problem
			Choice of Currency Exposures
		Spectrum of Currency Risk Management Strategies
			Passive Hedging
			Discretionary Hedging
			Active Currency Management
			Currency Overlay
		Formulating a Currency Management Program
		Economic Fundamentals, Technical Analysis and the Carry Trade
			Active Currency Management Based on Economic Fundamentals
			Active Currency Management Based on Technical Analysis
			Active Currency Management Based on the Carry Trade
		Volatility Trading
		Forward Contracts, FX Swaps, and Currency Options
			Forward Contracts
			Currency Options
		Currency Management Strategies
			Over-/Under-Hedging Using Forward Contracts
			Protective Put Using OTM Options
			Risk Reversal (or Collar)
			Put Spread
			Seagull Spread
			Exotic Options
			Section Summary
		Hedging Multiple Foreign Currencies
			Cross Hedges and Macro Hedges
			Minimum-Variance Hedge Ratio
			Basis Risk
		Currency Management Tools and Strategies: A Summary
		Currency Management for Emerging Market Currencies
			Special Considerations in Managing Emerging Market Currency Exposures
			Non-Deliverable Forwards
		Summary
		References
		Practice Problems
		Solutions