concurrent studying for FM and MFE. tips please!

[diputz42]

i just registered to sit for both FM and MFE in may with 10 days in between each exam. i'm concentrating on FM for now since from what i hear, FM is a sort of prerequisite to MFE. but does anyone know what topics in MFE i can learn/study without prior knowledge of FM material?

please, no "you dont have enough time to learn both" comments. i can do it!! (i hope)

[spencerhs5]

ya you def can do it, if you have the math background... you can probably jump into mfe once you have a grasp of puts and calls as well as basic time value of money. i havent seen anything in mfe thats really made me say "wow im glad i took fm first"

[Hydraskull]

does anyone know what topics in MFE i can learn/study without prior knowledge of FM material?

I'm tempted to say that there is nothing on MFE that doesn't build on FM knowledge. That said, there are certain things from FM that you should be very comfortable with and if you focus on them, you will be both well-prepared for FM and have a strong foundation for starting study on MFE:

Time Value of Money, especially Continuous Interest and Dividends
Options, Futures, and Forwards, including Put-Call Parity
Conceptual understanding of hedging and its purposes
Spot rates, forward rates, term structure of interest rates

Things you will not need for MFE that are in FM, off the top of my head:
Annuity Formulas
Loan Amortization
Sinking Funds
Nominal Interest Conversions
Immunization & Cash Flow Matching


I'm sure I missed stuff.

[spencerhs5]

I'm tempted to say that there is nothing on MFE that doesn't build on FM knowledge.

While this may or may not be true (I would say there are a few thigns that dont build on FM) it is certainly not necessary to have had FM, it may make learnging a few things easier, but it seems like MFE is A LOT of formulas, and if you can learn the formula you will be fine.

[Hydraskull]

While this may or may not be true (I would say there are a few thigns that dont build on FM) it is certainly not necessary to have had FM, it may make learnging a few things easier, but it seems like MFE is A LOT of formulas, and if you can learn the formula you will be fine.

That's true. I'm running on the assumption that much of what is in the formulas is based on theory from FM, particularly continuous interest and dividends. You can always learn something outside the box though... if you were to learn options purely from studying MFE then you would be all that much more prepared for FM.

[ActuarialHeroOfTime]

I think itd be very difficult to study MFE without already having passed or at least gotten through and understand most of the FM material. From binomial trees to black scholes to Greeks to CIR. All of these build on interest theory and DM.
Almost everything you see pretty much has to do with derivatives. I suppose that given a bunch of "numbers" you could just plug em in and price an option w Black scholes, but if you don't understand continuous compounding, lognormality (i know this isnt in FM), spot price, strike price, prepaid forwards, long, short... How is your calculus background? How about differential equations? It's definitely a lot of material, but good luck and post questions! Well all get through this.

[diputz42]

thanks for all the tips!

i graduated with math/econ double major almost a year ago. so calculus is easy. i'd have to refresh on diff eqs, but if its lower division level diff eqs, that should be simple. i didnt realize mfe relied so heavily on calculus!

i think what i'll try is to study 1 day of MFE for every 2 days of FM until i finish through the FM material. then from then on, complete an FM practice exam every other day while studying MFE full-on. hopefully as i learn the FM stuff, the MFE material will slowly sink in...

do topics within MFE build upon themselves? ie. do you need to understand ch1,2,3 before you're really able to learn ch4,5,6 and so on?

[Sophie H.]

thanks for all the tips!

i graduated with math/econ double major almost a year ago. so calculus is easy. i'd have to refresh on diff eqs, but if its lower division level diff eqs, that should be simple. i didnt realize mfe relied so heavily on calculus!

i think what i'll try is to study 1 day of MFE for every 2 days of FM until i finish through the FM material. then from then on, complete an FM practice exam every other day while studying MFE full-on. hopefully as i learn the FM stuff, the MFE material will slowly sink in...

do topics within MFE build upon themselves? ie. do you need to understand ch1,2,3 before you're really able to learn ch4,5,6 and so on?


Good luck!!

:study:

[scotth]

MFE doesn't use too much calculus.

I'm not sure how far you are in to your studies now, but if you're just starting, it is probably too much before test day. Although its always good to take the test if you can afford to spend the money even if you are not 100% ready.

Being an econ major I hope you have a deep understand of the time value of money and already know how to use most of the financial functions on the ba-ii

The interest theory portion of FM is almost entirely dependent on the above. If you have that, you learn the different annuity formulas and how to manipulate them, and also some smaller specific FM material like Immunization you will be fine.

MFE mainly just requires a good understanding of option spread strategies and certainly time value of money. Everything else pretty much stands on it's own. But yes they do build upon each other. Put call parity is essential to all topics. Binomial trees are discrete and Black/Scholes is continuous pricing strategies. Hedging requires this knowledge as does Brownian motion.

[diputz42]

how much does MFE rely on the calculator functions of the BAii? which calculator functions should i know how to use?

[ykim228]

how much does MFE rely on the calculator functions of the BAii? which calculator functions should i know how to use?

For MFE, I don't use financial calculator.

[scotth]

MFE doesn't use the financial functions... (except on a possible difficult Put Call Parity problem where you need to calculate the Present Value of a stock's dividends which are on some odd schedule)
... you are actually more likely to use the financial functions in MLC calculating life annuities.

My point was if you dont have a solid grasp of the calculator you will need to do many many problems to get this ingrained in your head... which will take time away from doing MFE. In MFE you will need to do forward and backward discounting with continuous interest rates most often. But it wouldn't be against the syllabus to throw in an i or i^(x) on you to be tricky.. especially in a Binomial tree problem