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    Role of ETF in the Flash Crash

    Hi David / Shakti (@David Harper, CFA, FRM, CIPM , ShaktiRathore) Some empirical studies concluded that the volatility spillover from futures to equity markets during the flash crash was heavily caused by ETP's... How can ETP blamed for this? Even if ETP's (or ETF's) didn't exist the...
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    Hedge fund strategy - Managed Futures - AIM 62.3

    Hi David / Shakti (@David Harper, CFA, FRM, CIPM / ShaktiRathore) In the explanation of managed futures as a hedge fund strategy, Schweser states that many managed futures funds are market timing funds, which switch between stocks and treasury, it also compares payoff function of a Managed...
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    Rolls Critique - AIM 57.3

    Hi David / Shakti. Can you please explain the following statements made by Roll (on CAPM) 1) "There is only 1 testable hypothesis associated with the CAPM - the market portfolio is mean variance efficient" by this does he mean that we are wrongly assuming that the market portfolio lies of...
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    Relative Risk v/s Active Risk (Active management Risk)

    Hi David / Shakti. Can you please explain the difference between Relative Risk v/s Active Risk. (Jurion Chapter 7 - AIM 55.5) Schweser Definitions as under : -->RELATIVE RISK - is measured by excess return, which is the $ loss relative to the benchmark, the shortfall is measured as the...
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    Incremental VaR - Jorian Chapter 7 - AIM 54.4

    Hi Shakti , Can you please elaborately explain the below question on Incremental VaR (from schweser pg. 30 Book 4 - investment) Que) A portfolio consist of Asset A & B. these assets are the risk factors in the portfolio. Volatility of A = 6% , B = 14%. There are $4 million invested in A and...
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    Neutralization of Alpha - AIM 53.3 - Grinold & Kahn Chapter 14

    Hi David, in the "Neutralization of Alpha - AIM 53.3 - Grinold & Kahn Chapter 14 " Could you explain how us naturalization the process of removing Biases and undesirable bets from alpha. 1) Benchmark Neutralization - "adjusting the benchmark alpha to 0" Que) here is it that we are adjusting...
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    Refining Alphas - Scaling and Trimming Alpas - AIM 53.2

    Hi David. Could you please explain the process of Scaling and Trimming alphas (in the Topic - Grinold & Kahn. Chapter 16 - Refining Alphas - Scaling and Trimming Alpas - AIM 53.2) 1) how do i interpret this formula for scaling : Alpha = (Volatility) x (Information coefficient) x (Score)...
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    Credit trade description & modelling issues

    Hello David / Shakti, in the readings (Malz Chapter 11) there is an example of a CDS strategy; --> Sell Protection on equity tranche + buy protection on mezzanine tranche i.e Long credit and credit spread risk of the equity tranche + short credit and credit spread risk on the mezzanine...
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    Improper Mapping Understates Liquidity Risk

    Hi David / Shakti, Liquidity Risk - The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. (Investopedia) eg. Convertible bonds can be mapped to Risk factors including Implied Volatilities, Credit spreads...
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    Synthetic Options

    Hi, I was researching on options and found some really good information on this website, I was wondering if option payoffs can be synthetically achieved. I would appreciate if you could help me solve the following Query. Can we replicate option payoff by using Futures? Eg. if an index is...
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