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CFA Level III
#1

Post one liners here: If our Human Capital is Bond-like, we should invest more aggressively (equity) and our demand for life insurance increases.

#2

A short position in an option is either out-of-the-money and no payment is due, or it is in-the-money and the short owes payment to the long. Therefore the short position bears NO CREDIT RISK.

#3

Honour willingness as long as it is below or equal to ability – except for the wealthy independent!

#4

If you can’t decide which of the A B C to choose and C says Either all correct or all incorrect; choose C. This is called error minimizing choice.

#5

additional compensation arrangement requires both clients and employer give the written approval.

#6

Box Spread: combo of a Bull Call and Bear Put Spread; a non-directional strategy. . . seeks to exploit arbitrage opportunities between options prices of the same underlying. Taylor Rule: gives an estimate for central bank interest rate decisions: R target = R Neutral + 0.5*(GDP expected - GDP trend) + 0.5*(Inflation expected - Inflation target)

#7

Grinold and Kroner: r=D1/P+g+i-repo yield+P/E

#8

delta (P/E) ^, right?

#9

mwvt9 Wrote: ------------------------------------------------------- > delta (P/E) ^, right? Oops…you’re absolutely right. My bad!

#10

When distinguishing between Type I and Type II errors, remember “Type I HORN.” Type I HO (Null Hypothesis) RN (Reject Null) Null = Manager adds no value; Reject and conclude that manager adds value when he actually does not.

#11

Don’t forget SAMURAI: Specified in advance, Appropriate, Measurable, Unambiguous, Reflective of current environment, Accountable (Manager), Investable.

#12

Return objective for a foundation: spending requirement + inflation + management costs If set up in perpetuity our goal is to preserve real purcahsing power.

#13

Types of benchmarks - MBS FRAC! Manager Universe Broad Mrkt indices Style indices Factor model Returns based Absoute Custom

#14

If only defense - lack of action or inaction ceteris paribus - bcoz of unexpected action/event, all else same

#15

passthismofo Wrote: ------------------------------------------------------- > Don’t forget SAMURAI: > > Specified in advance, Appropriate, Measurable, > Unambiguous, Reflective of current environment, > Accountable (Manager), Investable. R = “reflective of current investment opinion” meaning that the securities in the benchmark should be those that the mgr follows.

#16

Legal / Regulatory Constraints for Endowments and Foundations: UMIFA and Prudent Investor

#17

for asset betas including pension, B(e)=B(a)(D/E). so adjust the equation to make equity Beta the same.

#18

ERISA prohibits investment of more than 10% of DB plan assets in the company stock, but NO such law applies to DC plans

#19

Durations: Dfixed-Dfloating>0. To shorten duration take floating Asset (i.e. receive floating and pay fixed)

#20

I [insert name] [ValueAddict] PLEDGE TO CONQUER THE UNIVERSE AND ACHIEVE ALL OF MY GOALS! I WILL PREVAIL!!!