P2.T8. Investment Management

Practice questions for investment management and risk management

Sort By:
Title
Replies Views
Last Message
  1. Nicole Seaman

    P2.T8.708. Illiquidity risk premium & portfolio choice decision on the inclusion of illiquid assets

    Thanks @David Harper CFA FRM , this is very helpful
    Thanks @David Harper CFA FRM , this is very helpful
    Thanks @David Harper CFA FRM , this is very helpful
    Thanks @David Harper CFA FRM , this is very helpful
    Replies:
    4
    Views:
    28
  2. Nicole Seaman

    P2.T8.707. The biases of illiquid markets (Ang)

    for simplification purposes I will copy my text - posted below the question set - here as well. It might be useful: Some input here from my side (referring to question 707.3) for prospective Part II candidates without going into further detail about the theory. In November 2016 GARP tested the concept of unsmoothing returns in detail (answers 'a' and 'b' to questions 707.3 have been very...
    for simplification purposes I will copy my text - posted below the question set - here as well. It might be useful: Some input here from my side (referring to question 707.3) for prospective Part II candidates without going into further detail about the theory. In November 2016 GARP tested the concept of unsmoothing returns in detail (answers 'a' and 'b' to questions 707.3 have been very...
    for simplification purposes I will copy my text - posted below the question set - here as well. It might be useful: Some input here from my side (referring to question 707.3) for prospective Part II candidates without going into further detail about the theory. In November 2016 GARP tested the...
    for simplification purposes I will copy my text - posted below the question set - here as well. It might be useful: Some input here from my side (referring to question 707.3) for prospective Part...
    Replies:
    3
    Views:
    28
  3. Nicole Seaman

    P2.T8.706. Alpha, style analysis and the risk anomaly (Ang)

    Learning objectives: Explain how to measure time-varying factor exposures and their use in style analysis. Describe issues that arise when measuring alphas for nonlinear strategies. Compare the volatility anomaly and beta anomaly, and analyze evidence of each anomaly. Describe potential explanations for the risk anomaly. Questions: 706.1. In order to evaluate the performance of its funds,...
    Learning objectives: Explain how to measure time-varying factor exposures and their use in style analysis. Describe issues that arise when measuring alphas for nonlinear strategies. Compare the volatility anomaly and beta anomaly, and analyze evidence of each anomaly. Describe potential explanations for the risk anomaly. Questions: 706.1. In order to evaluate the performance of its funds,...
    Learning objectives: Explain how to measure time-varying factor exposures and their use in style analysis. Describe issues that arise when measuring alphas for nonlinear strategies. Compare the volatility anomaly and beta anomaly, and analyze evidence of each anomaly. Describe potential...
    Learning objectives: Explain how to measure time-varying factor exposures and their use in style analysis. Describe issues that arise when measuring alphas for nonlinear strategies. Compare the...
    Replies:
    0
    Views:
    18
  4. Nicole Seaman

    P2.T8.705. Berkshire Hathaway versus its benchmark (Ang)

    Hi @bpdulog Good observation, very good! I noticed that myself, is why you might notice, my true (b) softened the statement to "Berkshire generates significant alpha with at least 90.0% confidence, and the addition of the size (SMB) and value (HML) does IMPROVE the fit of the regression model." Please note that, as far as I can tell, author Andrew Ang only makes the statement that "The alpha...
    Hi @bpdulog Good observation, very good! I noticed that myself, is why you might notice, my true (b) softened the statement to "Berkshire generates significant alpha with at least 90.0% confidence, and the addition of the size (SMB) and value (HML) does IMPROVE the fit of the regression model." Please note that, as far as I can tell, author Andrew Ang only makes the statement that "The alpha...
    Hi @bpdulog Good observation, very good! I noticed that myself, is why you might notice, my true (b) softened the statement to "Berkshire generates significant alpha with at least 90.0% confidence, and the addition of the size (SMB) and value (HML) does IMPROVE the fit of the regression model."...
    Hi @bpdulog Good observation, very good! I noticed that myself, is why you might notice, my true (b) softened the statement to "Berkshire generates significant alpha with at least 90.0%...
    Replies:
    2
    Views:
    20
  5. Nicole Seaman

    P2.T8.704. Alpha and effective benchmarks (Andrew Ang)

    Thanks @David Harper CFA FRM , that was helpful but this leaves me even somewhat more confused. Is residual return and alpha the same thing? If so, I'm willing to accept that the intercept, 0.018, is the alpha in this case. However, why can't the average excess return of the portfolio and benchmark (.0329-.0098) be used? Isn't alpha basically the excess return over your benchmark?
    Thanks @David Harper CFA FRM , that was helpful but this leaves me even somewhat more confused. Is residual return and alpha the same thing? If so, I'm willing to accept that the intercept, 0.018, is the alpha in this case. However, why can't the average excess return of the portfolio and benchmark (.0329-.0098) be used? Isn't alpha basically the excess return over your benchmark?
    Thanks @David Harper CFA FRM , that was helpful but this leaves me even somewhat more confused. Is residual return and alpha the same thing? If so, I'm willing to accept that the intercept, 0.018, is the alpha in this case. However, why can't the average excess return of the portfolio and...
    Thanks @David Harper CFA FRM , that was helpful but this leaves me even somewhat more confused. Is residual return and alpha the same thing? If so, I'm willing to accept that the intercept,...
    Replies:
    3
    Views:
    32
  6. Nicole Seaman

    P2.T8.703. Value, size and momentum investing (Andrew Ang)

    Learning objectives: Assess methods of mitigating volatility risk in a portfolio, and describe challenges that arise when managing volatility risk. Explain how dynamic risk factors can be used in a multifactor model of asset returns, using the Fama-French model as an example. Compare value and momentum investment strategies, including their risk and return profiles. Questions: 703.1. Andrew...
    Learning objectives: Assess methods of mitigating volatility risk in a portfolio, and describe challenges that arise when managing volatility risk. Explain how dynamic risk factors can be used in a multifactor model of asset returns, using the Fama-French model as an example. Compare value and momentum investment strategies, including their risk and return profiles. Questions: 703.1. Andrew...
    Learning objectives: Assess methods of mitigating volatility risk in a portfolio, and describe challenges that arise when managing volatility risk. Explain how dynamic risk factors can be used in a multifactor model of asset returns, using the Fama-French model as an example. Compare value and...
    Learning objectives: Assess methods of mitigating volatility risk in a portfolio, and describe challenges that arise when managing volatility risk. Explain how dynamic risk factors can be used in...
    Replies:
    0
    Views:
    10
  7. Nicole Seaman

    P2.T8.702. Macroeconomic risk factors including growth, inflation and volatility (Andrew Ang)

    Hi @gwfrm16 Yes, indeed, our mistake. Thank you for noticing. I have corrected the answer to reflect the true version of the statement (ie, that all asset classes are worse under high inflation): "702.1. C. False. To be true, this should instead read: During periods of high inflation, all five asset classes perform significantly WORSE than during periods of low inflation." and added the...
    Hi @gwfrm16 Yes, indeed, our mistake. Thank you for noticing. I have corrected the answer to reflect the true version of the statement (ie, that all asset classes are worse under high inflation): "702.1. C. False. To be true, this should instead read: During periods of high inflation, all five asset classes perform significantly WORSE than during periods of low inflation." and added the...
    Hi @gwfrm16 Yes, indeed, our mistake. Thank you for noticing. I have corrected the answer to reflect the true version of the statement (ie, that all asset classes are worse under high inflation): "702.1. C. False. To be true, this should instead read: During periods of high inflation, all five...
    Hi @gwfrm16 Yes, indeed, our mistake. Thank you for noticing. I have corrected the answer to reflect the true version of the statement (ie, that all asset classes are worse under high inflation):...
    Replies:
    2
    Views:
    28
  8. Nicole Seaman

    P2.T8.701. Multifactor models (Andrew Ang)

    Learning objectives: Describe multifactor models, and compare and contrast multifactor models to the CAPM. Explain how stochastic discount factors are created and apply them in the valuation of assets. Describe efficient market theory and explain how markets can be inefficient. Questions: 701.1. In introducing multifactor models, Andrew Ang explains that "to capture the composite bad times...
    Learning objectives: Describe multifactor models, and compare and contrast multifactor models to the CAPM. Explain how stochastic discount factors are created and apply them in the valuation of assets. Describe efficient market theory and explain how markets can be inefficient. Questions: 701.1. In introducing multifactor models, Andrew Ang explains that "to capture the composite bad times...
    Learning objectives: Describe multifactor models, and compare and contrast multifactor models to the CAPM. Explain how stochastic discount factors are created and apply them in the valuation of assets. Describe efficient market theory and explain how markets can be...
    Learning objectives: Describe multifactor models, and compare and contrast multifactor models to the CAPM. Explain how stochastic discount factors are created and apply them in the valuation of...
    Replies:
    0
    Views:
    19
  9. Nicole Seaman

    P2.T8.700. Theory of factor risk premiums (Andrew Ang)

    Learning objectives: Provide examples of factors that impact asset prices, and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its assumptions, and explain how factor risk is addressed in the CAPM. Explain implications of using the CAPM to value assets, including equilibrium and optimal holdings, exposure to factor risk, its treatment of...
    Learning objectives: Provide examples of factors that impact asset prices, and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its assumptions, and explain how factor risk is addressed in the CAPM. Explain implications of using the CAPM to value assets, including equilibrium and optimal holdings, exposure to factor risk, its treatment of...
    Learning objectives: Provide examples of factors that impact asset prices, and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its assumptions, and explain how factor risk is addressed in the CAPM. Explain implications of using the CAPM to...
    Learning objectives: Provide examples of factors that impact asset prices, and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its...
    Replies:
    0
    Views:
    18
  10. Nicole Seaman

    P2.T8.414. Hedge fund due diligence, continued

    @bpdulog great point! Your interpretation ("the ability of the investor to pull out their money";) would make a lot more sense (at least to me) than the phrasing suggested by Mirabile ...
    @bpdulog great point! Your interpretation ("the ability of the investor to pull out their money";) would make a lot more sense (at least to me) than the phrasing suggested by Mirabile ...
    @bpdulog great point! Your interpretation ("the ability of the investor to pull out their money";) would make a lot more sense (at least to me) than the phrasing suggested by Mirabile ...
    @bpdulog great point! Your interpretation ("the ability of the investor to pull out their money";) would make a lot more sense (at least to me) than the phrasing suggested by Mirabile ...
    Replies:
    6
    Views:
    107
  11. Nicole Seaman

    P2.T8.413. Hedge fund due diligence

    I was thinking the same thing. I obviously saw A as an issue but C seemed to me like management was trying to hide something with vague wording.
    I was thinking the same thing. I obviously saw A as an issue but C seemed to me like management was trying to hide something with vague wording.
    I was thinking the same thing. I obviously saw A as an issue but C seemed to me like management was trying to hide something with vague wording.
    I was thinking the same thing. I obviously saw A as an issue but C seemed to me like management was trying to hide something with vague wording.
    Replies:
    7
    Views:
    175
  12. Nicole Seaman

    P2.T8.412. Hedge funds as diversifiers and agents

    AIMs: Describe the historical portfolio construction and performance trend of hedge funds compared to equity indices. Describe market events which resulted in a convergence of risk factors for different hedge fund strategies, and explain the impact of such a convergence on portfolio diversification strategies. Describe the problem of risk sharing asymmetry between principals and agents in the...
    AIMs: Describe the historical portfolio construction and performance trend of hedge funds compared to equity indices. Describe market events which resulted in a convergence of risk factors for different hedge fund strategies, and explain the impact of such a convergence on portfolio diversification strategies. Describe the problem of risk sharing asymmetry between principals and agents in the...
    AIMs: Describe the historical portfolio construction and performance trend of hedge funds compared to equity indices. Describe market events which resulted in a convergence of risk factors for different hedge fund strategies, and explain the impact of such a convergence on portfolio...
    AIMs: Describe the historical portfolio construction and performance trend of hedge funds compared to equity indices. Describe market events which resulted in a convergence of risk factors for...
    Replies:
    0
    Views:
    79
  13. Nicole Seaman

    P2.T8.411. Hedge funds strategies

    AIMs: Evaluate the role of investors in shaping the hedge fund industry. Explain the relationship between risk and alpha in hedge funds. Compare and contrast the different hedge fund strategies, describe their return characteristics, and describe the inherent risks of each strategy. Questions: 411.1. According to Fung and Hsieh "the majority of managed futures funds pursue trend following...
    AIMs: Evaluate the role of investors in shaping the hedge fund industry. Explain the relationship between risk and alpha in hedge funds. Compare and contrast the different hedge fund strategies, describe their return characteristics, and describe the inherent risks of each strategy. Questions: 411.1. According to Fung and Hsieh "the majority of managed futures funds pursue trend following...
    AIMs: Evaluate the role of investors in shaping the hedge fund industry. Explain the relationship between risk and alpha in hedge funds. Compare and contrast the different hedge fund strategies, describe their return characteristics, and describe the inherent risks of each...
    AIMs: Evaluate the role of investors in shaping the hedge fund industry. Explain the relationship between risk and alpha in hedge funds. Compare and contrast the different hedge fund strategies,...
    Replies:
    0
    Views:
    87
  14. Nicole Seaman

    P2.T8.410. Fung and Hsieh on hedge funds: industry and biases

    AIMs: Describe the characteristics of hedge funds and the hedge fund industry, and compare hedge funds with mutual funds. Explain biases which are commonly found in databases of hedge funds. Explain the evolution of the hedge fund industry and describe landmark events which precipitated major changes in the development of the industry. Questions: 410.1. Your wealthy Aunt Betty has capital to...
    AIMs: Describe the characteristics of hedge funds and the hedge fund industry, and compare hedge funds with mutual funds. Explain biases which are commonly found in databases of hedge funds. Explain the evolution of the hedge fund industry and describe landmark events which precipitated major changes in the development of the industry. Questions: 410.1. Your wealthy Aunt Betty has capital to...
    AIMs: Describe the characteristics of hedge funds and the hedge fund industry, and compare hedge funds with mutual funds. Explain biases which are commonly found in databases of hedge funds. Explain the evolution of the hedge fund industry and describe landmark events which precipitated major...
    AIMs: Describe the characteristics of hedge funds and the hedge fund industry, and compare hedge funds with mutual funds. Explain biases which are commonly found in databases of hedge funds....
    Replies:
    0
    Views:
    69
  15. Nicole Seaman

    P2.T8.409. Litterman on performance measurement

    This reading my be outdated - it conflicts with current ERM practices
    This reading my be outdated - it conflicts with current ERM practices
    This reading my be outdated - it conflicts with current ERM practices
    This reading my be outdated - it conflicts with current ERM practices
    Replies:
    13
    Views:
    173
  16. Nicole Seaman

    P2.T8.408. Risk planning and budgeting

    AIMs: Define, compare and contrast VaR and tracking error as risk measures. Describe risk planning, including its objectives, effects and the participants in its development. Describe risk budgeting and the role of quantitative methods in risk budgeting. Questions: 408.1. Both value at risk (VaR) and tracking error (TE) are considered risk measures. Which of the following statements is TRUE...
    AIMs: Define, compare and contrast VaR and tracking error as risk measures. Describe risk planning, including its objectives, effects and the participants in its development. Describe risk budgeting and the role of quantitative methods in risk budgeting. Questions: 408.1. Both value at risk (VaR) and tracking error (TE) are considered risk measures. Which of the following statements is TRUE...
    AIMs: Define, compare and contrast VaR and tracking error as risk measures. Describe risk planning, including its objectives, effects and the participants in its development. Describe risk budgeting and the role of quantitative methods in risk budgeting. Questions: 408.1. Both value at risk...
    AIMs: Define, compare and contrast VaR and tracking error as risk measures. Describe risk planning, including its objectives, effects and the participants in its development. Describe risk...
    Replies:
    0
    Views:
    78
  17. Nicole Seaman

    PQ-T8 P2.T8.407 Hedge fund strategies (topic review)

    Hi @Kashif Khalid I agree with you that global macro are top-down managers. But I think the reading stated that a global macro manager could employ some component of bottom-up approach, in addition to their top-down approach (which seems like the natural primary given their broad discretion across asset classses). But don't get me wrong, in terms of simplification and primary emphasis, I think...
    Hi @Kashif Khalid I agree with you that global macro are top-down managers. But I think the reading stated that a global macro manager could employ some component of bottom-up approach, in addition to their top-down approach (which seems like the natural primary given their broad discretion across asset classses). But don't get me wrong, in terms of simplification and primary emphasis, I think...
    Hi @Kashif Khalid I agree with you that global macro are top-down managers. But I think the reading stated that a global macro manager could employ some component of bottom-up approach, in addition to their top-down approach (which seems like the natural primary given their broad discretion...
    Hi @Kashif Khalid I agree with you that global macro are top-down managers. But I think the reading stated that a global macro manager could employ some component of bottom-up approach, in...
    Replies:
    4
    Views:
    210
  18. Nicole Seaman

    PQ-T8 P2.T8.406. Equity market neutral hedge funds (topic review)

    Ah I got it!Actually wasn't thinking from a hedged(post hedging)portfolio persepective,in which case what you say is bang on.Thanks a ton David!
    Ah I got it!Actually wasn't thinking from a hedged(post hedging)portfolio persepective,in which case what you say is bang on.Thanks a ton David!
    Ah I got it!Actually wasn't thinking from a hedged(post hedging)portfolio persepective,in which case what you say is bang on.Thanks a ton David!
    Ah I got it!Actually wasn't thinking from a hedged(post hedging)portfolio persepective,in which case what you say is bang on.Thanks a ton David!
    Replies:
    6
    Views:
    257
  19. Nicole Seaman

    PQ-T8 P2.T8.405. Style analysis and market timing (topic review)

    Hi @bpdulog oh okay, I see now how the table presentation could lead to the alternative calculation, but my intention was not to make it harder. I broke the table up (i) to use space better and (ii) I had thought it would make it easier to parse the economist's (phase of) six bear market predictions from his/her (next phase of) bull market predictions. Thanks!
    Hi @bpdulog oh okay, I see now how the table presentation could lead to the alternative calculation, but my intention was not to make it harder. I broke the table up (i) to use space better and (ii) I had thought it would make it easier to parse the economist's (phase of) six bear market predictions from his/her (next phase of) bull market predictions. Thanks!
    Hi @bpdulog oh okay, I see now how the table presentation could lead to the alternative calculation, but my intention was not to make it harder. I broke the table up (i) to use space better and (ii) I had thought it would make it easier to parse the economist's (phase of) six bear market...
    Hi @bpdulog oh okay, I see now how the table presentation could lead to the alternative calculation, but my intention was not to make it harder. I broke the table up (i) to use space better and...
    Replies:
    9
    Views:
    344
  20. Nicole Seaman

    PQ-T8 P2.T8.404. Information ratio, M-squared and the significance of performance (topic review)

    HI @bpdulog Re 404.2, it is the risk-free rate. I just edited the sentence to read (emphasis on my addition): "Because portfolio volatility is 30.0% and market volatility is 18.0%, the adjusted portfolio (i.e., the portfolio with volatility equivalent to the market's) is 60.0% portfolio and 40.0% risk-free asset, as 18%/30% = 60%" because the idea with M^2 is to shift the mix (ie, asset...
    HI @bpdulog Re 404.2, it is the risk-free rate. I just edited the sentence to read (emphasis on my addition): "Because portfolio volatility is 30.0% and market volatility is 18.0%, the adjusted portfolio (i.e., the portfolio with volatility equivalent to the market's) is 60.0% portfolio and 40.0% risk-free asset, as 18%/30% = 60%" because the idea with M^2 is to shift the mix (ie, asset...
    HI @bpdulog Re 404.2, it is the risk-free rate. I just edited the sentence to read (emphasis on my addition): "Because portfolio volatility is 30.0% and market volatility is 18.0%, the adjusted portfolio (i.e., the portfolio with volatility equivalent to the market's) is 60.0% portfolio and...
    HI @bpdulog Re 404.2, it is the risk-free rate. I just edited the sentence to read (emphasis on my addition): "Because portfolio volatility is 30.0% and market volatility is 18.0%, the adjusted...
    Replies:
    12
    Views:
    447
  21. Nicole Seaman

    PQ-T8 P2.T8.403. Time-weighted versus dollar-weighted returns (topic review)

    Yes Thanks David.
    Yes Thanks David.
    Yes Thanks David.
    Yes Thanks David.
    Replies:
    11
    Views:
    330
  22. Nicole Seaman

    PQ-T8 P2.T8.402. Performance evaluation (FRM handbook) (topic review)

    Hi @fjc120 I agree with @ARKnowlto88 but if it helps: personally I like to be mindful of VaR(aX + bY) = a^2*var(X) + b^2*var(Y) + 2*a*b*cov(X,Y) which handles difference of variables when we consider that the difference simply assumes (-b); ie, a negative weighting. The second squared term is unaffected as (-b)^2*var(Y) = b^2*var(Y), but the third term becomes +2*a*(-b)*cov(X,Y). In this way,...
    Hi @fjc120 I agree with @ARKnowlto88 but if it helps: personally I like to be mindful of VaR(aX + bY) = a^2*var(X) + b^2*var(Y) + 2*a*b*cov(X,Y) which handles difference of variables when we consider that the difference simply assumes (-b); ie, a negative weighting. The second squared term is unaffected as (-b)^2*var(Y) = b^2*var(Y), but the third term becomes +2*a*(-b)*cov(X,Y). In this way,...
    Hi @fjc120 I agree with @ARKnowlto88 but if it helps: personally I like to be mindful of VaR(aX + bY) = a^2*var(X) + b^2*var(Y) + 2*a*b*cov(X,Y) which handles difference of variables when we consider that the difference simply assumes (-b); ie, a negative weighting. The second squared term is...
    Hi @fjc120 I agree with @ARKnowlto88 but if it helps: personally I like to be mindful of VaR(aX + bY) = a^2*var(X) + b^2*var(Y) + 2*a*b*cov(X,Y) which handles difference of variables when we...
    Replies:
    12
    Views:
    311
  23. David Harper CFA FRM

    PQ-T8 P2.T8.401. Component and marginal value at risk (VaR) calculations (topic review)

    Hi @bpdulog I think your first is pretty close: You can retrieve "component volatility" (or volatility contribution) in (%) terms with Portfolio volatility 26.2% * 25% weight * 0.4834 β(B, P) = 3.1669%, which represents the Bond's (B) contribution to the portfolio volatility of 26.2%. So that's fairly straightforward: component % = Portfolio vol% * w% * β(B,P). The scale the volatility (%) to...
    Hi @bpdulog I think your first is pretty close: You can retrieve "component volatility" (or volatility contribution) in (%) terms with Portfolio volatility 26.2% * 25% weight * 0.4834 β(B, P) = 3.1669%, which represents the Bond's (B) contribution to the portfolio volatility of 26.2%. So that's fairly straightforward: component % = Portfolio vol% * w% * β(B,P). The scale the volatility (%) to...
    Hi @bpdulog I think your first is pretty close: You can retrieve "component volatility" (or volatility contribution) in (%) terms with Portfolio volatility 26.2% * 25% weight * 0.4834 β(B, P) = 3.1669%, which represents the Bond's (B) contribution to the portfolio volatility of 26.2%. So that's...
    Hi @bpdulog I think your first is pretty close: You can retrieve "component volatility" (or volatility contribution) in (%) terms with Portfolio volatility 26.2% * 25% weight * 0.4834 β(B, P) =...
    Replies:
    6
    Views:
    238
  24. Nicole Seaman

    PQ-T8 P2.T8.400. Diversified portfolio Value at Risk (VaR) (topic review)

    @bpdulog the simple portfolio variance (std. deviation) explicitly accounts for the weights (total wealth: 700+300 = 1000; therefore, the weight for asset A is 70% and the weight for asset B 30%). The VaR calculation uses the dollar amount for each asset and therefore accounts for the weight as well! We have a $ 700M dollar and a $ 300M position. Look below at 4.) for an explanation What is...
    @bpdulog the simple portfolio variance (std. deviation) explicitly accounts for the weights (total wealth: 700+300 = 1000; therefore, the weight for asset A is 70% and the weight for asset B 30%). The VaR calculation uses the dollar amount for each asset and therefore accounts for the weight as well! We have a $ 700M dollar and a $ 300M position. Look below at 4.) for an explanation What is...
    @bpdulog the simple portfolio variance (std. deviation) explicitly accounts for the weights (total wealth: 700+300 = 1000; therefore, the weight for asset A is 70% and the weight for asset B 30%). The VaR calculation uses the dollar amount for each asset and therefore accounts for the weight...
    @bpdulog the simple portfolio variance (std. deviation) explicitly accounts for the weights (total wealth: 700+300 = 1000; therefore, the weight for asset A is 70% and the weight for asset B...
    Replies:
    30
    Views:
    535
  25. Suzanne Evans

    P2.T8.27. More arbitrage strategies (Stowell)

    Thanks David, understood we net off any divs recvd from long vs divs owed on short to broker.
    Thanks David, understood we net off any divs recvd from long vs divs owed on short to broker.
    Thanks David, understood we net off any divs recvd from long vs divs owed on short to broker.
    Thanks David, understood we net off any divs recvd from long vs divs owed on short to broker.
    Replies:
    8
    Views:
    127
  26. David Harper CFA FRM

    P2.T8.26. Arbitrage strategies (Stowell)

    With regards to question 2 i have following doubt :- a) How does she arbitrage in short position in swap and short position in bond. What i understand is she is paying floating rate in swap ( i.e there is outflow of money) and treasury bond she is paying fixed coupon (there is outflow). In both position there is outflow of money. b) what do u mean by the line "The modified duration of each...
    With regards to question 2 i have following doubt :- a) How does she arbitrage in short position in swap and short position in bond. What i understand is she is paying floating rate in swap ( i.e there is outflow of money) and treasury bond she is paying fixed coupon (there is outflow). In both position there is outflow of money. b) what do u mean by the line "The modified duration of each...
    With regards to question 2 i have following doubt :- a) How does she arbitrage in short position in swap and short position in bond. What i understand is she is paying floating rate in swap ( i.e there is outflow of money) and treasury bond she is paying fixed coupon (there is outflow). In both...
    With regards to question 2 i have following doubt :- a) How does she arbitrage in short position in swap and short position in bond. What i understand is she is paying floating rate in swap ( i.e...
    Replies:
    9
    Views:
    143
  27. Suzanne Evans

    P2.T8.25. Convertible arbitrage (Stowell)

    AIMs: Explain the common arbitrage strategies of hedge funds, including: Fixed income-based arbitrage; Convertible arbitrage; Relative value arbitrage Questions: 25.1. Arbitrage is possible in EACH of the following conditions EXCEPT for when: a. An otherwise identical bond trades at different prices in different markets b. Two assets with identical cash flows patterns trade at different...
    AIMs: Explain the common arbitrage strategies of hedge funds, including: Fixed income-based arbitrage; Convertible arbitrage; Relative value arbitrage Questions: 25.1. Arbitrage is possible in EACH of the following conditions EXCEPT for when: a. An otherwise identical bond trades at different prices in different markets b. Two assets with identical cash flows patterns trade at different...
    AIMs: Explain the common arbitrage strategies of hedge funds, including: Fixed income-based arbitrage; Convertible arbitrage; Relative value arbitrage Questions: 25.1. Arbitrage is possible in EACH of the following conditions EXCEPT for when: a. An otherwise identical bond trades at different...
    AIMs: Explain the common arbitrage strategies of hedge funds, including: Fixed income-based arbitrage; Convertible arbitrage; Relative value arbitrage Questions: 25.1. Arbitrage is possible in...
    Replies:
    0
    Views:
    73
  28. Suzanne Evans

    P2.T8.24. Equity long/short hedge fund strategies (Stowell)

    Hi Lee, As I understand, I *think* the difference is the strategic intent (the style) and maybe the role of beta exposures. While both are long/short: The key idea in equity long/short is to avail the manager of opportunities the additional opportunity to short (roughly doubling his/her opportunity set). But the equity/long short remains comfortable with beta exposures and probably engages...
    Hi Lee, As I understand, I *think* the difference is the strategic intent (the style) and maybe the role of beta exposures. While both are long/short: The key idea in equity long/short is to avail the manager of opportunities the additional opportunity to short (roughly doubling his/her opportunity set). But the equity/long short remains comfortable with beta exposures and probably engages...
    Hi Lee, As I understand, I *think* the difference is the strategic intent (the style) and maybe the role of beta exposures. While both are long/short: The key idea in equity long/short is to avail the manager of opportunities the additional opportunity to short (roughly doubling his/her...
    Hi Lee, As I understand, I *think* the difference is the strategic intent (the style) and maybe the role of beta exposures. While both are long/short: The key idea in equity long/short is to...
    Replies:
    3
    Views:
    115
  29. Suzanne Evans

    P2.T8.23. Hedge funds compared to private equity and mutual funds (Stowell)

    AIMs: Discuss the liquidity of hedge fund investments and the usage of lock-ups, gates and side pockets. Compare hedge funds to private equity and mutual funds. Describe what fund of funds are and provide arguments for and against using them as an investment vehicle. Questions: 23.1. Acme Hedge Fund earns an annual performance fee of 20%. During the current year, the valuation of an illiquid...
    AIMs: Discuss the liquidity of hedge fund investments and the usage of lock-ups, gates and side pockets. Compare hedge funds to private equity and mutual funds. Describe what fund of funds are and provide arguments for and against using them as an investment vehicle. Questions: 23.1. Acme Hedge Fund earns an annual performance fee of 20%. During the current year, the valuation of an illiquid...
    AIMs: Discuss the liquidity of hedge fund investments and the usage of lock-ups, gates and side pockets. Compare hedge funds to private equity and mutual funds. Describe what fund of funds are and provide arguments for and against using them as an investment vehicle. Questions: 23.1. Acme...
    AIMs: Discuss the liquidity of hedge fund investments and the usage of lock-ups, gates and side pockets. Compare hedge funds to private equity and mutual funds. Describe what fund of funds are and...
    Replies:
    0
    Views:
    66
  30. Suzanne Evans

    P2.T8.22. High-water marks and hedge fund performance

    Thank you for clearing it up !!
    Thank you for clearing it up !!
    Thank you for clearing it up !!
    Thank you for clearing it up !!
    Replies:
    13
    Views:
    201

Thread Display Options

Loading...