CFA Non Parallel Yield Curve Shifts – Butterfly vs Twists

CFA Yield Curve Twists Butterfly

Below is a sample CFA memory trick from the Analyst Tricks CFA Level 2 Exam Memorization Tricks Guide. The 2015 Guide features 55 memorization tricks to help you cram for the CFA with just a month left of studying. List of L2 Topics Covered are mostly similar in nature. The Guide is aimed to help you memorize otherwise obscure terms for concepts you understand, but just can’t seem to remember.

Below, I’ve included text from my memory trick for remembering the types of non parallel shifts in the yield curve. I’ve also included a screenshot at the bottom so you can get a feel for how the guide is laid out with CFA visuals.

Fixed Income
Term Structure
Non Parallel Shifts in Yield Curve: Butterfly vs. Twist


ButterFly-Shift-CFAThere are two types of Non Parallel shifts in the yield curve:: Twists and Butterfly Shifts

  • Yield Curve Twists are slope changes where the curve becomes flatter or steeper
  • Butterfly shifts are changes in the degree of curvature. Twists are positive or negative
  • Memorize this by thinking about real, live butterflies. Everyone loves butterflies!

CFA Memory Trick

Yield Curve CFA TwistsPositive Butterfly: a shift where there’s less curvature, killing, and capturing

  • It’s a very positive and good thing when fewer butterflies get killed or captured!
  • Remember, everyone loves butterflies!
  • A Positive Butterfly shift is Less Curvature, Capturing, and Killing.

Negative Butterfly shift

  • A Negative Butterfly move is simply more Curvature, Capturing, and Killing

Nick here. Find the somewhat grainy Screenshot of the actual Guide page below. Check out the full CFA Level 2 Guide here.

Update: A second sample I’ve shared on the blog covers the CFA Fama French Fries model.

CFA Yield Curve Twists Butterfly

If you’d like more tricks, check out the Free CFA Memory Tricks page to get a PDF sample which features a few additional, free CFA hacks that might suit your liking.