Why On Earth Are CFA Derivatives and Economics So Hard?

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By Sophie

We are all looking for that special secret sauce to pass the CFA exams. And we’re here to help you achieve that here at 300 Hours, delving deep into tons of data and figuring out what works (or not).

While there’s definitely no substitute for core grasp of the material through your revision and some hardcore practicing, I’d like to think there’s some other subtle advantage we can gain from gleaming through the data (says the nerd).

Here are some interesting facts about a couple of stumbling points that makes a difference between a pass and a Band 10 fail.

Derivatives is a tough topic for you


Source: CFA June 2013 Candidate Survey (CFAI)

71% of you said so, and it’s pretty consistent across all levels.

Yet, when we looked at the recent June 2013 analysis by topic for Level 1 and Level 2, it looks like…

Derivatives and Economics are your Achilles heel


Source: Level 1 June 2013 CFA Results Analysis (300 Hours)


Source: Level 2 June 2013 CFA Results Analysis (300 Hours)

Why is that? More importantly, why should we care?

Let’s take a step back and answer the latter question first. 

Derivatives and Economics stood out like a sore thumb, especially when it comes to candidates who failed (more evident than the general sample charts above). The nature of these 2 topics are also striking, because they are the more intuitive ones that rely on understanding and logic, rather than memory or rules which require more effort to recall. The idea is, if we master these ‘intuitive’ topics where the concepts are easier the grasp and remembered, wouldn’t it make a huge difference between a pass and a fail, for relatively little effort?

Why this post then? Well, it so happens I am familiar with both that tricky topics, having been an Economics graduate and worked in Derivatives for a few years at the start of my career. While I have some ideas of how to help you all nail these, but first I need your help to understand the “why?” to make sure I address the problem at source.

Finally… why do you think we perform badly for Derivatives and Economics?

I currently have 3 hypotheses, but need your help to this to better understand the situation, so please feel free to share your thoughts in the comments below.

  1. It is truly difficult. The concepts are not intuitive and God knows why put-call parity ever existed.
  2. It is a small topic with only 5-10%, so candidates generally put less effort in.
  3. Finance/Econ grads take it for granted, thinking that they’ve covered it sufficiently before.

What do you think? Which part of Econs or Derivatives is tricky for you to grasp and you need help on? I’d love to hear your thoughts in the comments below!

Zee Tan
Author: Zee Tan


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