IFoA SP6 study plan

Map the SP6 syllabus into a one-page topic tree covering forwards, futures, options, swaps and embedded/structured products, and mark each branch with your current confidence (1-5).

Derive the no-arbitrage forward price for a dividend-paying stock and for a currency, and state the assumptions (carry, borrowing/lending rates, short-selling) each derivation depends on.

Compute mark-to-market values of a forward contract at an intermediate date and explain why the initial value is zero but the MTM is not.

Work through the mechanics of margin, daily settlement and basis risk for futures, and write down how basis converges to zero at expiry.

Derive put-call parity for European options and use it to construct synthetic positions; verify with two numerical examples.

Apply the binomial tree to price European and American options on a non-dividend and a dividend-paying stock, and explain when early exercise is optimal.

State the Black-Scholes assumptions and price a European call and put, then compute delta, gamma, vega, theta and rho for both.

Explain implied volatility and the volatility smile/skew, and describe what the skew tells you about the market's view of tail risk.

Price plain vanilla interest rate swaps from a set of discount factors and explain the par swap rate and the swap curve.

Value a cross-currency swap and a basis swap and identify the credit and funding risks each introduces.

Explain swaptions, caps and floors, and describe how a cap is a portfolio of caplets and how a swaption relates to a forward swap.

Describe how a structured product (e.g. a callable note) can be decomposed into a bond plus an option, and sketch its payoff and risk profile.

Explain the greeks' behaviour near expiry and for deep in/out-of-the-money options, and describe how a delta-hedged portfolio's P&L depends on gamma and realised versus implied volatility.

Describe delta, gamma and vega hedging in practice, including the cost of rebalancing and why discrete hedging leaves residual risk.

Outline the main exotic options (barrier, Asian, lookback, digital) and explain how each payoff differs from vanilla and why it is harder to price.

Draft a short note on model risk: where Black-Scholes breaks down and how practitioners adjust (local vol, stochastic vol).

Explain the role of derivatives in hedging, speculation and arbitrage, and give a concrete example of each using a named instrument.

Describe the main derivative markets and participants (exchange-traded vs OTC, clearing houses, market makers) and how central clearing changes counterparty risk.

Explain counterparty credit risk, CVA and collateral/CSA mechanics, and how a credit event affects an in-the-money swap.

Summarise the key regulatory themes (e.g. mandatory clearing, margin requirements, trade reporting) and why they exist.

Work through past-paper-style questions on pricing and greeks under timed conditions (at least 3 full questions).

Identify your weakest two topics from the timed attempts and write a targeted revision list for each.

Practise explaining a derivation in writing (e.g. Black-Scholes PDE or put-call parity) in exam-appropriate length.

Check your formula sheet against the syllabus and fill any gaps.

Complete a full mock paper under exam time pressure and mark it honestly.

Review every incorrect or partial answer and re-derive the underlying result rather than just re-reading the solution.

Rehearse the highest-frequency calculation types (forward pricing, swap valuation, option greeks, binomial) until each is fluent.

Tighten your formula sheet to one page you can recall from memory.

Do a second full mock and compare scores to week 7 to confirm improvement.

Revisit the correction log and confirm each error type is now resolved.

Practise exam technique: allocating time per mark, showing working, and handling unfamiliar wording.

Final review of the formula sheet and a short rest before the exam.