Fixed Income: CFA® Level I
It is 11–14% of the 2027 Level I exam. 48 learning outcomes across 19 learning modules.
Fixed-Income Instrument Features
- Set out the core characteristics of a debt security
- Explain what a bond indenture is and the positive and restrictive covenants in it
Fixed-Income Cash Flows and Types
- Explain bond terms that depend on contingent events
- Set out coupon designs that do not pay a fixed rate
- Explain the ways a bond's principal can be paid back
Fixed-Income Bond Valuation: Prices and Yields
- Work out a bond's price from a given discount rate
- Explain how price moves against yield and why bonds trade at a premium or discount
- Explain how a bond's price converges to par as maturity nears
- Use matrix pricing to value a bond that rarely trades
- Tell apart the full price, the flat price and accrued interest
Yield and Yield Spread Measures for Fixed-Rate Bonds
- Contrast current yield with yield to maturity
- Set out what yield to maturity implicitly assumes
- Work out both yield to worst and yield to call
- Restate a yield at a different compounding frequency
- Explain the I-spread and curves built from swap rates
- Contrast the Z-spread with the option-adjusted spread
Yield and Yield Spread Measures for Floating-Rate Instruments
- Tell a floating-rate note's quoted margin apart from its discount margin
- Explain money market yield measures and the conventions they follow
The Term Structure of Interest Rates: Spot, Par, and Forward Curves
- Value a bond by discounting at spot rates
- Tell apart the spot curve, the par curve and the forward curve
- Work out forward rates from a set of spot rates
Interest Rate Risk and Return
Yield-Based Bond Duration Measures and Properties
- Use modified duration to estimate how a bond's price will change
- Tell apart Macaulay duration, modified duration and money duration
- Set out how a bond's duration behaves and what drives it
- Work out a bond's PVBP (value change per basis point) and explain it
Yield-Based Bond Convexity and Portfolio Properties
- Work out convexity and explain what it means
- Work out the duration of a portfolio and explain where the measure falls short
Curve-Based and Empirical Fixed-Income Risk Measures
- Explain effective duration and the cases that require it
- Explain key rate duration and what it is used for
- Explain empirical duration and why it may diverge from analytical duration
Credit Risk
- Set out the elements that make up credit risk
- Explain credit ratings, notching and where ratings fall short
- Break a yield spread down into the parts that make it up
- Work out expected loss using default probability and loss given default
Credit Analysis for Government Issuers
Credit Analysis for Corporate Issuers
- Use the four Cs framework to analyse credit
- Contrast credit analysis of high yield issuers with that of investment grade ones
Fixed-Income Securitization
Asset-Backed Security (ABS) Instrument and Market Features
- Explain how structured securities are split by credit and by time
- Explain asset-backed securities with non-mortgage collateral
- Explain covered bonds and what sets them apart from other asset-backed securities
- Explain collateralized debt obligations, the cash flows they generate and the risks involved
Fixed-Income Markets for Corporate Issuers
- Explain repurchase agreements, what they are used for and the risks they carry
- Contrast the short-term financing options open to companies and to financial institutions
Fixed-Income Markets for Government Issuers
- Explain how issuers that are sovereign, non-sovereign, quasi-government or supranational raise funds
Fixed-Income Issuance and Trading
Mortgage-Backed Security (MBS) Instrument and Market Features
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