Hi,

I was asked recently what materials and whatnot I used to prepare for FM. I thought my reply would be useful for those preparing for FM in the future. Please add your 'tips and tricks' and any advice you may have. Take it with a grain of salt, & good luck!

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I used the ACTEX manual almost exclusively. I did not purchase an interest theory book. I did purchase the Derivative Markets book, but I did not reference it much. You could probably get by without it, but it depends on your familiarity with derivatives. The ACTEX was good: quick and clean.

I also used MS excel to generate graphs for the different spreads and stuff, so I had a more intuitive understanding of payout functions. This was something I felt would help me really know how derivatives work without having to think about it too much.

I developed good calculator habits. I use a BA II Plus Professional, and I make good use of the memory registers. You can figure out a way you like yourself, but I'll give you an example of how I use them.

To calculate an annuity (one of the most basic but step-intensive procedures; you'll do a lot of this) I would use the calculator like this:

enter the interest rate in mem(1)

add 1, and hit the 1/x buttor, then sto it in mem(2)

hit the y^x button followed by the number of periods and sto the result in (3)

hit the +/- button and add 1, then divide by mem(1)

sto(4) this is the annuity-immediate value

if you need an annuity-due, divide by mem(2)

there are other annuities that you can easily compute from here. This habit pattern allows you to blaze through computations. I would practice the method until I could do it within 20 or 15 seconds. You can also apply similar methods to MFE when you do binomial trees and black-scholes. The calculator is your friend!!

In fact, I used the calculator so much during the actual exam, it felt like cheating. If you know how to use it, you can do a lot of difficult problems easily. You can figure out loan and interest rate problems iteratively--meaning, just plug in the answers given in the exam, and you usually are trying to solve something so that the NPV = 0, so you can adjust your input (i.e. the exam answer choice) based on the result of the iterative process. Get very familiar with your calculator. Of course, do not rely on it; you must know how to solve the problems directly. Frequently SOA/CAS will make sure you can do this.

I made myself a 'boldface' (pilot slang for emergency procedures you need to have memorized so you can recall them during a crisis) that had a list of the names of all of the formulas that I felt is was vital to know. I printed this out on computer and I would fill it out without reference to the actual formulas.

Last word of advice is time yourself doing the problems as you go through--because SOA/CAS will!

Good luck to everyone.

I was asked recently what materials and whatnot I used to prepare for FM. I thought my reply would be useful for those preparing for FM in the future. Please add your 'tips and tricks' and any advice you may have. Take it with a grain of salt, & good luck!

~~~~~~~~

I used the ACTEX manual almost exclusively. I did not purchase an interest theory book. I did purchase the Derivative Markets book, but I did not reference it much. You could probably get by without it, but it depends on your familiarity with derivatives. The ACTEX was good: quick and clean.

I also used MS excel to generate graphs for the different spreads and stuff, so I had a more intuitive understanding of payout functions. This was something I felt would help me really know how derivatives work without having to think about it too much.

I developed good calculator habits. I use a BA II Plus Professional, and I make good use of the memory registers. You can figure out a way you like yourself, but I'll give you an example of how I use them.

To calculate an annuity (one of the most basic but step-intensive procedures; you'll do a lot of this) I would use the calculator like this:

enter the interest rate in mem(1)

add 1, and hit the 1/x buttor, then sto it in mem(2)

hit the y^x button followed by the number of periods and sto the result in (3)

hit the +/- button and add 1, then divide by mem(1)

sto(4) this is the annuity-immediate value

if you need an annuity-due, divide by mem(2)

there are other annuities that you can easily compute from here. This habit pattern allows you to blaze through computations. I would practice the method until I could do it within 20 or 15 seconds. You can also apply similar methods to MFE when you do binomial trees and black-scholes. The calculator is your friend!!

In fact, I used the calculator so much during the actual exam, it felt like cheating. If you know how to use it, you can do a lot of difficult problems easily. You can figure out loan and interest rate problems iteratively--meaning, just plug in the answers given in the exam, and you usually are trying to solve something so that the NPV = 0, so you can adjust your input (i.e. the exam answer choice) based on the result of the iterative process. Get very familiar with your calculator. Of course, do not rely on it; you must know how to solve the problems directly. Frequently SOA/CAS will make sure you can do this.

I made myself a 'boldface' (pilot slang for emergency procedures you need to have memorized so you can recall them during a crisis) that had a list of the names of all of the formulas that I felt is was vital to know. I printed this out on computer and I would fill it out without reference to the actual formulas.

Last word of advice is time yourself doing the problems as you go through--because SOA/CAS will!

Good luck to everyone.

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