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  1. Ludwma
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  4. Ludwma
    Thread

    Duration

    1. Hi FS, The question should specify, but you are generally okay to seek (by default) to find the modified duration, unless told otherwise, as the modified duration: Is the accurate sensitivity Informs the DV01 (i.e., = modified duration*P/10000 ) and the basis for hedging Is the duration estimated by effective duration The most common occurrence of the Macaulay duration, of course, is that...
      Hi FS, The question should specify, but you are generally okay to seek (by default) to find the modified duration, unless told otherwise, as the modified duration: Is the accurate sensitivity Informs the DV01 (i.e., = modified duration*P/10000 ) and the basis for hedging Is the duration estimated by effective duration The most common occurrence of the Macaulay duration, of course, is that...
      Hi FS, The question should specify, but you are generally okay to seek (by default) to find the modified duration, unless told otherwise, as the modified duration: Is the accurate sensitivity Informs the DV01 (i.e., = modified duration*P/10000 ) and the basis for hedging Is the duration...
      Hi FS, The question should specify, but you are generally okay to seek (by default) to find the modified duration, unless told otherwise, as the modified duration: Is the accurate...
    Thread by: Ludwma, May 18, 2012, 1 replies, in forum: P1.T4. Valuation & Risk Models (30%)
  5. Ludwma
    1. Hi FS, It is true that Elton, per answer (c), includes as the first CAPM assumption: But I sort of do like the question because, as I say in my video, I think homogeneity is the most critical and audacious (unrealistic) assumption. Homogeneity is required for the equilibrium that fancifully gets all investors to agree on the same Market portfolio. CAPM pretty much falls apart without out,...
      Hi FS, It is true that Elton, per answer (c), includes as the first CAPM assumption: But I sort of do like the question because, as I say in my video, I think homogeneity is the most critical and audacious (unrealistic) assumption. Homogeneity is required for the equilibrium that fancifully gets all investors to agree on the same Market portfolio. CAPM pretty much falls apart without out,...
      Hi FS, It is true that Elton, per answer (c), includes as the first CAPM assumption: But I sort of do like the question because, as I say in my video, I think homogeneity is the most critical and audacious (unrealistic) assumption. Homogeneity is required for the equilibrium that fancifully...
      Hi FS, It is true that Elton, per answer (c), includes as the first CAPM assumption: But I sort of do like the question because, as I say in my video, I think homogeneity is the most critical...
    Thread by: Ludwma, May 16, 2012, 1 replies, in forum: P1.T1. Foundations of Risk (20%)
  6. Ludwma
    1. Hi David, There is a question in the GARP exam, asking if we are short or long FRA (question 18, 2012 practice exam). What does it mean being long or short FRA? One of the two sides is paying fixed - floating (or floating - fixed). Thanks as usual for your support, FS
      Hi David, There is a question in the GARP exam, asking if we are short or long FRA (question 18, 2012 practice exam). What does it mean being long or short FRA? One of the two sides is paying fixed - floating (or floating - fixed). Thanks as usual for your support, FS
      Hi David, There is a question in the GARP exam, asking if we are short or long FRA (question 18, 2012 practice exam). What does it mean being long or short FRA? One of the two sides is paying fixed - floating (or floating - fixed). Thanks as usual for your support, FS
      Hi David, There is a question in the GARP exam, asking if we are short or long FRA (question 18, 2012 practice exam). What does it mean being long or short FRA? One of the two sides is paying...
    Thread by: Ludwma, May 15, 2012, 0 replies, in forum: P1.T4. Valuation & Risk Models (30%)
  7. Ludwma
  8. Ludwma
    Thread

    Bond Price

    1. Hi FS, I think the $20 is okay, by using PMT = 20, we are assuming 2 periods per year, $20 each period (1/2 of 40%) which is robust to the day count; i.e., $20 per semiannual period would be correct for act/act, act/360 or 30/360. Here is the underlying XLS: There is an issue as to why I can get either $928.77 (answer given, i think consistent with Hull, so I think it's okay) versus...
      Hi FS, I think the $20 is okay, by using PMT = 20, we are assuming 2 periods per year, $20 each period (1/2 of 40%) which is robust to the day count; i.e., $20 per semiannual period would be correct for act/act, act/360 or 30/360. Here is the underlying XLS: There is an issue as to why I can get either $928.77 (answer given, i think consistent with Hull, so I think it's okay) versus...
      Hi FS, I think the $20 is okay, by using PMT = 20, we are assuming 2 periods per year, $20 each period (1/2 of 40%) which is robust to the day count; i.e., $20 per semiannual period would be correct for act/act, act/360 or 30/360. Here is the underlying XLS: There is an issue as to why I...
      Hi FS, I think the $20 is okay, by using PMT = 20, we are assuming 2 periods per year, $20 each period (1/2 of 40%) which is robust to the day count; i.e., $20 per semiannual period would be...
    Thread by: Ludwma, Mar 13, 2012, 1 replies, in forum: P1.T3. Financial Markets & Products (30%)
  9. Ludwma
    1. Hi FS, 169.4 is trick because it combines two steps. Money market instrument use so-called discount rates, which are not "true" rates of return. In this case, the quote of a Treasury is 9.0 and this means that the interest earned is 9.0% of the face value per 360 days. In the case of a 180-day T-bill, this QUOTE of 9.0 implies 9%*100*180/360 = $4.5 of interest earned per $100 face; 4.5% over...
      Hi FS, 169.4 is trick because it combines two steps. Money market instrument use so-called discount rates, which are not "true" rates of return. In this case, the quote of a Treasury is 9.0 and this means that the interest earned is 9.0% of the face value per 360 days. In the case of a 180-day T-bill, this QUOTE of 9.0 implies 9%*100*180/360 = $4.5 of interest earned per $100 face; 4.5% over...
      Hi FS, 169.4 is trick because it combines two steps. Money market instrument use so-called discount rates, which are not "true" rates of return. In this case, the quote of a Treasury is 9.0 and this means that the interest earned is 9.0% of the face value per 360 days. In the case of a 180-day...
      Hi FS, 169.4 is trick because it combines two steps. Money market instrument use so-called discount rates, which are not "true" rates of return. In this case, the quote of a Treasury is 9.0 and...
    Thread by: Ludwma, Mar 13, 2012, 3 replies, in forum: P1.T3. Financial Markets & Products (30%)
  10. Ludwma
    1. Hi Fabiano, This sort of encapsulates Hull on hedging with futures. The hedge is based on a univariate regression (spot price change regressed against futures price change). The SLOPE of the regression line is the optimal hedge ratio (h*): h* = beta (Forward with respect to spot= cov(F,S,) / variance(F) <-- must know this; same as capm beta = cov(security, market)/variance(market) h*=...
      Hi Fabiano, This sort of encapsulates Hull on hedging with futures. The hedge is based on a univariate regression (spot price change regressed against futures price change). The SLOPE of the regression line is the optimal hedge ratio (h*): h* = beta (Forward with respect to spot= cov(F,S,) / variance(F) <-- must know this; same as capm beta = cov(security, market)/variance(market) h*=...
      Hi Fabiano, This sort of encapsulates Hull on hedging with futures. The hedge is based on a univariate regression (spot price change regressed against futures price change). The SLOPE of the regression line is the optimal hedge ratio (h*): h* = beta (Forward with respect to spot= cov(F,S,) /...
      Hi Fabiano, This sort of encapsulates Hull on hedging with futures. The hedge is based on a univariate regression (spot price change regressed against futures price change). The SLOPE of the...
    Thread by: Ludwma, Mar 8, 2012, 1 replies, in forum: P1.T3. Financial Markets & Products (30%)
  11. Ludwma
    1. Hi Fabiano, See just a few threads down @
      Hi Fabiano, See just a few threads down @
      Hi Fabiano, See just a few threads down @
      Hi Fabiano, See just a few threads down @
    Thread by: Ludwma, Mar 8, 2012, 1 replies, in forum: P1.T3. Financial Markets & Products (30%)
  12. Ludwma
    1. Hi @tosuhn as the question (following Miller) implies I think, the exam is unlikely to ask you to compute a p-value. But you still want to understand how to retrieve it. I used T.DIST(1.1336, 9 df, TRUE = cdf) ~= 86.5% or T.DIST.RT(1.1736, 9) ~= 13.5%. But you just want to understand what it means. I think a good way to see this is to recognize the upper row in the lookup table as effectively...
      Hi @tosuhn as the question (following Miller) implies I think, the exam is unlikely to ask you to compute a p-value. But you still want to understand how to retrieve it. I used T.DIST(1.1336, 9 df, TRUE = cdf) ~= 86.5% or T.DIST.RT(1.1736, 9) ~= 13.5%. But you just want to understand what it means. I think a good way to see this is to recognize the upper row in the lookup table as effectively...
      Hi @tosuhn as the question (following Miller) implies I think, the exam is unlikely to ask you to compute a p-value. But you still want to understand how to retrieve it. I used T.DIST(1.1336, 9 df, TRUE = cdf) ~= 86.5% or T.DIST.RT(1.1736, 9) ~= 13.5%. But you just want to understand what it...
      Hi @tosuhn as the question (following Miller) implies I think, the exam is unlikely to ask you to compute a p-value. But you still want to understand how to retrieve it. I used T.DIST(1.1336, 9...
    Thread by: Ludwma, Feb 28, 2012, 6 replies, in forum: P1.T2. Quantitative Methods (20%)
  13. Ludwma
    1. Hi FS, w'Zw (or w^T*Z*w) is just the matrix notion for n-asset portfolio variance. We are accustomed to the 2-asset case, where variance = w1^2*variance(1) + w2^2*variance(2) + 2*w1*w2*covariance(1,2), but this is just a special case of a vector of several weights (vector w) and a covariance matrix (Z). We get the n-asset variance if we multiply: row vector of weights * covariance matrix *...
      Hi FS, w'Zw (or w^T*Z*w) is just the matrix notion for n-asset portfolio variance. We are accustomed to the 2-asset case, where variance = w1^2*variance(1) + w2^2*variance(2) + 2*w1*w2*covariance(1,2), but this is just a special case of a vector of several weights (vector w) and a covariance matrix (Z). We get the n-asset variance if we multiply: row vector of weights * covariance matrix *...
      Hi FS, w'Zw (or w^T*Z*w) is just the matrix notion for n-asset portfolio variance. We are accustomed to the 2-asset case, where variance = w1^2*variance(1) + w2^2*variance(2) + 2*w1*w2*covariance(1,2), but this is just a special case of a vector of several weights (vector w) and a covariance...
      Hi FS, w'Zw (or w^T*Z*w) is just the matrix notion for n-asset portfolio variance. We are accustomed to the 2-asset case, where variance = w1^2*variance(1) + w2^2*variance(2) +...
    Thread by: Ludwma, Feb 27, 2012, 1 replies, in forum: P1.T2. Quantitative Methods (20%)
  14. Ludwma
    1. ahansen, I just meant that i posted before reading your (cross posted), I can see your posts fine. Okay, thank you for actual practice perspective, it's good to know ... re: the "appeal to authority:" well-played sir, i am a buyer. (although, yikes, that is four synonyms ... although frankly, each has a worthwhile perspective ... it's rich to unpack just the semiotics)!
      ahansen, I just meant that i posted before reading your (cross posted), I can see your posts fine. Okay, thank you for actual practice perspective, it's good to know ... re: the "appeal to authority:" well-played sir, i am a buyer. (although, yikes, that is four synonyms ... although frankly, each has a worthwhile perspective ... it's rich to unpack just the semiotics)!
      ahansen, I just meant that i posted before reading your (cross posted), I can see your posts fine. Okay, thank you for actual practice perspective, it's good to know ... re: the "appeal to authority:" well-played sir, i am a buyer. (although, yikes, that is four synonyms ... although frankly,...
      ahansen, I just meant that i posted before reading your (cross posted), I can see your posts fine. Okay, thank you for actual practice perspective, it's good to know ... re: the "appeal to...
    Thread by: Ludwma, Feb 27, 2012, 5 replies, in forum: P1.T2. Quantitative Methods (20%)
  15. Ludwma
  16. Ludwma
  17. Ludwma
    1. Monte Carlo methods do not require a parametric distribution, although it is a special case of Monte Carlo methods and a sufficient condition for Monte Carlo simulations. Monte Carlo simulations can be run on any distribution, parametric or non-parametric. As an example, the law of large numbers implies the Glivenko-Cantelli theorem (for some topology). This again, implies that any empirical...
      Monte Carlo methods do not require a parametric distribution, although it is a special case of Monte Carlo methods and a sufficient condition for Monte Carlo simulations. Monte Carlo simulations can be run on any distribution, parametric or non-parametric. As an example, the law of large numbers implies the Glivenko-Cantelli theorem (for some topology). This again, implies that any empirical...
      Monte Carlo methods do not require a parametric distribution, although it is a special case of Monte Carlo methods and a sufficient condition for Monte Carlo simulations. Monte Carlo simulations can be run on any distribution, parametric or non-parametric. As an example, the law of large...
      Monte Carlo methods do not require a parametric distribution, although it is a special case of Monte Carlo methods and a sufficient condition for Monte Carlo simulations. Monte Carlo simulations...
    Thread by: Ludwma, Feb 22, 2012, 2 replies, in forum: P1.T2. Quantitative Methods (20%)
  18. Ludwma
    1. Hi, std.dev(60 daily log-returns)that you obtained is the average value of the daily volatility(not 60 day volatility,please look at formula carefully) so you scale it by sqrt(252) as there are 252 days in a year to get the annualized vol. thanks
      Hi, std.dev(60 daily log-returns)that you obtained is the average value of the daily volatility(not 60 day volatility,please look at formula carefully) so you scale it by sqrt(252) as there are 252 days in a year to get the annualized vol. thanks
      Hi, std.dev(60 daily log-returns)that you obtained is the average value of the daily volatility(not 60 day volatility,please look at formula carefully) so you scale it by sqrt(252) as there are 252 days in a year to get the annualized vol. thanks
      Hi, std.dev(60 daily log-returns)that you obtained is the average value of the daily volatility(not 60 day volatility,please look at formula carefully) so you scale it by sqrt(252) as there are...
    Thread by: Ludwma, Feb 22, 2012, 6 replies, in forum: P1.T2. Quantitative Methods (20%)
  19. Ludwma
  20. Ludwma