Pass CFA Level 1 Exam at First Attempt by Memory Tricks - Put-Call Parity (Derivatives)

In this video tutorial, we review the use of easy memory shortcuts, study plan/strategy, mnemonic tips to help you memorize CFA preps so you can maximize your opportunity to pass 2021 CFA Level 1 exam in your first attempt.

We will show you the complete mnemonic for CFA Level 1 - Scale of Measurement Put-Call Parity (Derivatives). We will coach you step-by-step on how to relate the concept to mnemonic tips.

Even if you have familiarized the concepts, on the CFA exam day, it may take you extra amount of time for you to retrieve the info under the time-constraint and stressful environment.

We will show you how to prepare and apply the memory trick to answer sample CFA level 1 practice questions and fulfill all the CFA requirements.

It is a price relationship between a put option, call option and the underlying stock.

Assuming no arbitrage exists, one can start creating different synthetic products based on this formula.

Our simple objective here is to help you memorize the basic form of this formula in ONE MNEMONIC PICTURE.

Stock Price + Put Option = Call option + Present Value of the Strike Price

Basic Idea is: if Strike Price is higher, it is more likely that the call cannot be exercised. The call price will be lower and hence put price to be higher.

PV of the Strike Price = K x 1/(1+Risk Free Rate)^Time

In the formula itself:

S = Stock Price
P = Put Option
C = Call Option
K = StriKe Price

Mnemonic Shortcut: SiP a CoKe
Storyline: In a Party (think Parity), a woman SiP a CoKe.

PV of Strike Price= K/(1+RFR)^t

Mnemonic Shortcut: (1+RFR)^t → $1+Raspberry FlavoR Tea
Storyline: The woman add $1 to get a Raspberry FlavoR Tea

VISIT our CFA Memory Shortcuts - Level 1 Full Note:

[davidsavage]

That girl would be doing something else with coke at a party 😂