P2.T8. Investment Management

Practice questions for investment management and risk management

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  1. Kavita.bhangdia

    Tracking error

    Thanks David.. they just dont seem to make anything easy for us.. do they?:( Regards, Kavita
    Thanks David.. they just dont seem to make anything easy for us.. do they?:( Regards, Kavita
    Thanks David.. they just dont seem to make anything easy for us.. do they?:( Regards, Kavita
    Thanks David.. they just dont seem to make anything easy for us.. do they?:( Regards, Kavita
    Replies:
    2
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    30
  2. Nicole Manley

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

    AIMs: Explain how due diligence can be performed on a fund’s operational environment. Explain how a fund’s business model risk and its fraud risk can be assessed. Describe elements that can be included as part of a due diligence questionnaire. Questions: 414.1. In regard to the hedge fund's operational environment, Mirable advises each of the following as true for investors during due...
    AIMs: Explain how due diligence can be performed on a fund’s operational environment. Explain how a fund’s business model risk and its fraud risk can be assessed. Describe elements that can be included as part of a due diligence questionnaire. Questions: 414.1. In regard to the hedge fund's operational environment, Mirable advises each of the following as true for investors during due...
    AIMs: Explain how due diligence can be performed on a fund’s operational environment. Explain how a fund’s business model risk and its fraud risk can be assessed. Describe elements that can be included as part of a due diligence questionnaire. Questions: 414.1. In regard to the hedge fund's...
    AIMs: Explain how due diligence can be performed on a fund’s operational environment. Explain how a fund’s business model risk and its fraud risk can be assessed. Describe elements that can be...
    Replies:
    0
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    73
  3. Nicole Manley

    P2.T8.413. Hedge fund due diligence

    Hi @sneakyplacebo I gave you a star because I tend to share your view on this; i.e., I think equity ownership--which after all can be dispersed into the firm, in even modest/token amounts depending on the compensation design, and is therefore really not prohibitively expensive in all scenarios--is a critical factor. I'd personally view the lack of any equity (or equity-like alignment) as a...
    Hi @sneakyplacebo I gave you a star because I tend to share your view on this; i.e., I think equity ownership--which after all can be dispersed into the firm, in even modest/token amounts depending on the compensation design, and is therefore really not prohibitively expensive in all scenarios--is a critical factor. I'd personally view the lack of any equity (or equity-like alignment) as a...
    Hi @sneakyplacebo I gave you a star because I tend to share your view on this; i.e., I think equity ownership--which after all can be dispersed into the firm, in even modest/token amounts depending on the compensation design, and is therefore really not prohibitively expensive in all...
    Hi @sneakyplacebo I gave you a star because I tend to share your view on this; i.e., I think equity ownership--which after all can be dispersed into the firm, in even modest/token amounts...
    Replies:
    4
    Views:
    121
  4. Nicole Manley

    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...
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    0
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    70
  5. Nicole Manley

    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
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    70
  6. Nicole Manley

    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
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    59
  7. Nicole Manley

    P2.T8.409. Litterman on performance measurement

    Hi @neveo I don't follow you. 409.2.D. is the answer; i.e., (D) is false. So the question agrees with you that "The result has to be considered in the context of the environment and does not isolate the impact of the environment?" What I mean is: This is (D) as given, which is FALSE and therefore the correct answer to 402.2: FALSE statement = "d. Both only need a limited amount of data and,...
    Hi @neveo I don't follow you. 409.2.D. is the answer; i.e., (D) is false. So the question agrees with you that "The result has to be considered in the context of the environment and does not isolate the impact of the environment?" What I mean is: This is (D) as given, which is FALSE and therefore the correct answer to 402.2: FALSE statement = "d. Both only need a limited amount of data and,...
    Hi @neveo I don't follow you. 409.2.D. is the answer; i.e., (D) is false. So the question agrees with you that "The result has to be considered in the context of the environment and does not isolate the impact of the environment?" What I mean is: This is (D) as given, which is FALSE and...
    Hi @neveo I don't follow you. 409.2.D. is the answer; i.e., (D) is false. So the question agrees with you that "The result has to be considered in the context of the environment and does not...
    Replies:
    4
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    112
  8. Nicole Manley

    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
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    62
  9. Nicole Manley

    P2.T8.407 Hedge fund strategies

    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
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    149
  10. Nicole Manley

    P2.T8.406. Equity market neutral hedge funds

    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
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    195
  11. Nicole Manley

    P2.T8.405. Style analysis and market timing

    Hi @taunk Yes, apologies, it's just a flat-out typo :( cc: @Nicole Manley: I changed question 405.3 to read "If the excess return of +1.20% is decomposed into two components ..." because it mistakenly repeated the +.90% from the prior question. Thanks!
    Hi @taunk Yes, apologies, it's just a flat-out typo :( cc: @Nicole Manley: I changed question 405.3 to read "If the excess return of +1.20% is decomposed into two components ..." because it mistakenly repeated the +.90% from the prior question. Thanks!
    Hi @taunk Yes, apologies, it's just a flat-out typo :( cc: @Nicole Manley: I changed question 405.3 to read "If the excess return of +1.20% is decomposed into two components ..." because it mistakenly repeated the +.90% from the prior question. Thanks!
    Hi @taunk Yes, apologies, it's just a flat-out typo :( cc: @Nicole Manley: I changed question 405.3 to read "If the excess return of +1.20% is decomposed into two components ..." because it...
    Replies:
    9
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    228
  12. Nicole Manley

    P2.T8.404. Information ratio, M-squared and the significance of performance

    Right, that's clever and seems to pencil out in agreement, nice!
    Right, that's clever and seems to pencil out in agreement, nice!
    Right, that's clever and seems to pencil out in agreement, nice!
    Right, that's clever and seems to pencil out in agreement, nice!
    Replies:
    7
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    310
  13. CFO2013

    P2 Instructional Video: Bodie, Chapter 24

    Oh, yes, I see now, very cool, thank you!
    Oh, yes, I see now, very cool, thank you!
    Oh, yes, I see now, very cool, thank you!
    Oh, yes, I see now, very cool, thank you!
    Replies:
    3
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    38
  14. Nicole Manley

    P2.T8.403. Time-weighted versus dollar-weighted returns

    Yes Thanks David.
    Yes Thanks David.
    Yes Thanks David.
    Yes Thanks David.
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    15
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    267
  15. Nicole Manley

    P2.T8.402. Performance evaluation (FRM handbook)

    @ivojekle Yes, you found a good link. Currently (under the FRM) the information ration can be validly defined as either residual return (aka alpha)/residual risk, or active return/active risk (aka, tracking error) where the satisfying criteria is ratio consistency. In practice, I don't think it's really a problem if the question is carefully written. Question 402.3 happens to define an IR as...
    @ivojekle Yes, you found a good link. Currently (under the FRM) the information ration can be validly defined as either residual return (aka alpha)/residual risk, or active return/active risk (aka, tracking error) where the satisfying criteria is ratio consistency. In practice, I don't think it's really a problem if the question is carefully written. Question 402.3 happens to define an IR as...
    @ivojekle Yes, you found a good link. Currently (under the FRM) the information ration can be validly defined as either residual return (aka alpha)/residual risk, or active return/active risk (aka, tracking error) where the satisfying criteria is ratio consistency. In practice, I don't think...
    @ivojekle Yes, you found a good link. Currently (under the FRM) the information ration can be validly defined as either residual return (aka alpha)/residual risk, or active return/active risk...
    Replies:
    6
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    186
  16. David Harper CFA FRM

    P2.T8.401. Component and marginal value at risk (VaR) calculations

    In question 1. isn't Cov (c,p) = Cov (0.2*c, 0.5s + o.3*b + 0.2*c). How do we get from that to 20%*COV(C,C) + 50%*COV(C,S) + 30%*COV(C,B) or may be not, I am putting an un-necessary 0.2 in front of c in cov. ignore this post. I get this one now.
    In question 1. isn't Cov (c,p) = Cov (0.2*c, 0.5s + o.3*b + 0.2*c). How do we get from that to 20%*COV(C,C) + 50%*COV(C,S) + 30%*COV(C,B) or may be not, I am putting an un-necessary 0.2 in front of c in cov. ignore this post. I get this one now.
    In question 1. isn't Cov (c,p) = Cov (0.2*c, 0.5s + o.3*b + 0.2*c). How do we get from that to 20%*COV(C,C) + 50%*COV(C,S) + 30%*COV(C,B) or may be not, I am putting an un-necessary 0.2 in front of c in cov. ignore this post. I get this one now.
    In question 1. isn't Cov (c,p) = Cov (0.2*c, 0.5s + o.3*b + 0.2*c). How do we get from that to 20%*COV(C,C) + 50%*COV(C,S) + 30%*COV(C,B) or may be not, I am putting an un-necessary 0.2 in front...
    Replies:
    7
    Views:
    183
  17. Nicole Manley

    P2.T8.400. Diversified portfolio Value at Risk (VaR)

    Hi @Oliver Carson The weights are implicitly in the individual VaRs; e.g., the first position has an individual VaR of $242.0 million which is equal to 800 portfolio value *65% position weight * 20% volatility * 2.33 deviate. It's sort of cool how both the deviate and the portfolio dollar value distribute (as in, distributive property) such that the individual VaRs already contain the weights...
    Hi @Oliver Carson The weights are implicitly in the individual VaRs; e.g., the first position has an individual VaR of $242.0 million which is equal to 800 portfolio value *65% position weight * 20% volatility * 2.33 deviate. It's sort of cool how both the deviate and the portfolio dollar value distribute (as in, distributive property) such that the individual VaRs already contain the weights...
    Hi @Oliver Carson The weights are implicitly in the individual VaRs; e.g., the first position has an individual VaR of $242.0 million which is equal to 800 portfolio value *65% position weight * 20% volatility * 2.33 deviate. It's sort of cool how both the deviate and the portfolio dollar value...
    Hi @Oliver Carson The weights are implicitly in the individual VaRs; e.g., the first position has an individual VaR of $242.0 million which is equal to 800 portfolio value *65% position weight *...
    Replies:
    18
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    288
  18. Manish Vij

    Topic 8 Investment Management - Practice Question Sets

    Hi Manish, can you please see answer to same question here, thanks
    Hi Manish, can you please see answer to same question here, thanks
    Hi Manish, can you please see answer to same question here, thanks
    Hi Manish, can you please see answer to same question here, thanks
    Replies:
    1
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    52
  19. Laughlin1

    Private Equity Secondary Market Discount to NAV analysis

    Hi David, BT members What would you recommend in terms of the most appropriate technique/approach/distribution to use for making statistical loss assumptions on observed secondary market discount to NAV data for Private Equity funds? Many Thanks, Murph1
    Hi David, BT members What would you recommend in terms of the most appropriate technique/approach/distribution to use for making statistical loss assumptions on observed secondary market discount to NAV data for Private Equity funds? Many Thanks, Murph1
    Hi David, BT members What would you recommend in terms of the most appropriate technique/approach/distribution to use for making statistical loss assumptions on observed secondary market discount to NAV data for Private Equity funds? Many Thanks, Murph1
    Hi David, BT members What would you recommend in terms of the most appropriate technique/approach/distribution to use for making statistical loss assumptions on observed secondary market...
    Replies:
    0
    Views:
    17
  20. rickm123

    time and dollar weighted

    Hi david, can you re -upload? pls quote="David Harper CFA FRM CIPM, post: 16609, member: 10"]Hi Rick, I won't have time to post the updated 8.c.1 this week, after all (I need to finish the mock exams). Here is the XLS that I used to develop question T8.15, this XLS shows dollars and time-weighted: In regard to the HP12c, sure it can do the dollar-weighted return b/c the DWR is an IRR,...
    Hi david, can you re -upload? pls quote="David Harper CFA FRM CIPM, post: 16609, member: 10"]Hi Rick, I won't have time to post the updated 8.c.1 this week, after all (I need to finish the mock exams). Here is the XLS that I used to develop question T8.15, this XLS shows dollars and time-weighted: In regard to the HP12c, sure it can do the dollar-weighted return b/c the DWR is an IRR,...
    Hi david, can you re -upload? pls quote="David Harper CFA FRM CIPM, post: 16609, member: 10"]Hi Rick, I won't have time to post the updated 8.c.1 this week, after all (I need to finish the mock exams). Here is the XLS that I used to develop question T8.15, this XLS shows dollars and...
    Hi david, can you re -upload? pls quote="David Harper CFA FRM CIPM, post: 16609, member: 10"]Hi Rick, I won't have time to post the updated 8.c.1 this week, after all (I need to finish the...
    Replies:
    6
    Views:
    47

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