Home / Flashcard library / Careers & certifications / CFA Program Level II / Derivatives, Alternatives and Portfolio

Careers & certifications

CFA Level II — Derivatives, Alternatives and Portfolio flashcards

10 of 80 cards free to study here · 4 topics · the whole deck is built into Willys

Forward, futures and swap pricing and valuation, binomial and BSM option valuation with the Greeks, real estate and commodities (private equity as background beyond the 2026 and 2027 curricula), multifactor models, the fundamental law, VaR, backtesting and ethics.

Get the app All CFA Program Level II decks

Learn deck · part of CFA Program Level II · written against: CFA Program Level II curriculum topics (concepts and formulas; no figures that change yearly). Updated 2026-10-10.

Study the free sample

10 cards from the deck as they are. Flip, rate yourself, filter by topic; your progress stays in this browser.

The 10 sample cards as a list
  1. A long forward was entered at 105. Six months later, with six months left, the forward price for the same date is 108 and the annual risk-free rate is 4%. What is the long position worth?
    About 2.94. Vt=Ft−F0(1+r)T−t=31.040.5V_t = \frac{F_t - F_0}{(1 + r)^{T - t}} = \frac{3}{1.04^{0.5}} — the gain locked in, discounted to today.
    Derivatives › Forwards and Futures
  2. A stock trades at 50 and pays a dividend of 1.00 in three months. With a 5% annual risk-free rate, what is the no-arbitrage one-year forward price?
    About 51.46. F0=(S0−PV(D))(1+r)T=(50−11.050.25)×1.05F_0 = \left( S_0 - PV(D) \right)(1 + r)^T = \left( 50 - \frac{1}{1.05^{0.25}} \right) \times 1.05⁠.
    Derivatives › Forwards and Futures
  3. What is the forward price of an equity index with a continuously compounded dividend yield q?
    F0=S0e(rc−q)TF_0 = S_0 e^{(r_c - q)T} — the dividend yield reduces the carry cost, so a higher yield means a lower forward price.
    Derivatives › Forwards and Futures
  4. Which three approaches are used to appraise commercial real estate?
    The income approach (direct capitalization or DCF), the sales comparison approach (recent sales of similar properties) and the cost approach (replacement cost less depreciation, plus land).

    Watch out: the cost approach suits new or special-purpose properties with few comparable sales.
    Alternative Investments › Real Estate
  5. A property's next-year net operating income is 600,000 dollars, investors require 8% and NOI is expected to grow 2% a year. What is it worth by direct capitalization?
    10 million dollars — the cap rate is about r − g = 6%, and V=NOI1RcapV = \frac{NOI_1}{R_{cap}}⁠.
    Alternative Investments › Real Estate
  6. A REIT reports net income of 100, real estate depreciation of 40 and a gain on property sales of 10. What is its funds from operations?
    130 — FFO adds back real estate depreciation and removes gains on property sales: 100 + 40 − 10.
    Alternative Investments › Real Estate
  7. Why do assets that pay off well in bad economic times tend to offer low expected returns?
    They hedge consumption: payoffs arrive when the marginal value of money is highest, so investors pay up for them, lowering expected returns.
    Portfolio Management › Economics and Investment Markets
  8. What does the break-even inflation rate measure, and why is it not a pure inflation forecast?
    The nominal yield minus the inflation-indexed (real) yield of the same maturity; it includes expected inflation plus an inflation risk premium.
    Portfolio Management › Economics and Investment Markets
  9. A manager uses client commissions to buy third-party research that helps manage those clients' portfolios, and also to pay for new office furniture. Which use is acceptable?
    Research that benefits the clients whose commissions paid for it is acceptable; furniture is not, because brokerage is the client's asset (Standard III(A) Loyalty, Prudence, and Care).
    Ethical and Professional Standards › Duties to Clients and Employers
  10. A pension client directs its manager to send trades through a broker of the client's choosing. How should the manager respond?
    The manager may follow the direction — the brokerage belongs to the client — but should disclose that best execution may not be achieved with that broker.
    Ethical and Professional Standards › Duties to Clients and Employers

Unlock the whole deck

You are studying a free 10-card sample. All 80 cards of CFA Level II — Derivatives, Alternatives and Portfolio, the other 4 CFA Program Level II decks, and spaced-repetition scheduling are built into Willys. 14-day free trial, then $14.99 a year.

Get the app

In Willys, tap Exam Library at the top of your Decks (or Browse Exam Library… under the + button), find the exam on its shelf or by search, tick it and tap Add.

More CFA Program Level II decks

FRA, Corporate Issuers and QuantEconomicsEquity and Fixed IncomePractice Questions

← All CFA Program Level II decks, with the study guide and topic outline.

About these cards

Review status: Second-reader reviewed, with corrections applied.

Checked against:

  • CFA Program 2026 and 2027 Level II topic outlines (topic outline only; no text copied)

These are independent study notes written for Willys. They are not official exam material, may contain mistakes, and are no substitute for your course, your teacher or the exam owner's own publications. Found an error? Tell us — corrections ship as a new version of the deck.

Not financial, tax or legal advice. These cards prepare you for an exam; rules and figures change, so check current standards before relying on any of it.

CFA Institute does not endorse, promote, or warrant the accuracy or quality of this product. CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Use of these pages is covered by our Terms of Use.