Understanding Products and Their Risks: flashcards

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Section 2 weight

33 of 75 scored items - 44 percent, the largest section by far.

Price and interest rates

Inverse. Rates up, price of an existing fixed-rate bond down.

Discount bond ranking

YTC > YTM > current yield > nominal yield. Premium inverts it. Par converges.

Diversification addresses

Non-systematic risk. Systematic (market) risk is what remains after it.

Letter of intent vs ROA

LOI = forward looking commitment. ROA = counts holdings already owned.

DPP knowledge block

Pass-through tax treatment, unlisted, generally illiquid.

Covered call

Writer already owns the underlying shares and can deliver on assignment.

Listed options clear through

The Options Clearing Corporation (OCC). Disclosure via the ODD.