A couple of questions on various topics

Hi all,

Just looking to tie up some questions on several topics before the big day. If anyone can confirm or answer, it would be greatly appreciated.


  1. Are physical cash gifts prohibited, or is this the same rule as any other gift i.e. an amount that can reasonably impair objectivity and independence?
  2. From my understanding regarding permission and disclosure;

Additional compensation - must be provided permission in writing (before the fact) but disclosure (after the fact) i.e. before the years performance, or after the year end.
Competing with employer - must be asked to employer and confirmed but do not need to receive permission in writing. Further, it is only additional compensation before the fact where written permission from the employer is required?


  1. Neutral rate is nominal therefore unless stated as the real neutral rate, no inflation needs to be added?
  2. A current account deficit could indicate an appreciation of the currency of that country, as it could indicates net exports (as opposed to net imports)? Net exports would lead to an appreciation of the currency, given the need to purchase the currency in order to buy goods and services from that country?


  1. Long options add positive convexity, buying MBS adds negative convexity, going long a call is long volatility, long put is negative volatility?
  2. Volatility skew worsening/more prominent is a bear signal as cost of OTM put is increasing. Volatility smile is a bull signal, as OTM calls are more expensive?

PM Institutional

  1. For DB schemes, return objective is in relation to surplus or contributions? For endowment and foundation it is achieving a real return in relation to the spending rate? In terms of risk, should both return objectives speak of a reasonable level of volatility?


  1. In terms of full replication, is there a rule of thumb regarding the number of holdings in which it becomes too large to be viable e.g. 250, 500?
  2. Allocation attribution is (Rw - Bw) x (Br - Btr)?


  1. Laddered has more liquidity than a barbell portfolio in general, but less convexity?
  2. Fixed rate payer is long duration, floating rate is short duration?


Other way round.

Thanks Magician.

Just to confirm my understanding following this, payer of floating, will reset with IR movement. Therefore higher sensitivity to rate changes, therefore long duration. Fixed payer, unaffected by IR movement, short duration?


At low yields, yes; at high yields, no.


No; it’s long volatility.

My pleasure.

You’re focusing on the spot values of the payments.

Focus on the present value of the payments; i.e., think of the payments as bonds. Fixed-rate bonds have long durations; floating-rate bonds have short durations.

Great! Thanks again!