And now a word from our sponsor (derivatives: risk management)

In the series of articles I’ve written on adjusting portfolios temporarily with derivatives (, I advocate using one step to adjust both value and beta of an equity portfolio, or both value and duration of a fixed income portfolio; this differs from the official CFA Institute approach which is to separate changing the value from changing the sensitivity.

I’ve had a few candidates recently contact me, concerned that following my approach will lose them points on the exam, as they’re not following the prescribed CFA Institute method. I decided to ask CFA Institute for a ruling on this, and got a reply today:

I am happy to assist with your inquiry. A candidate would not be penalized in the grading process under the situation described. Because the candidate arrives at a correct answer, and uses a valid approach that is equivalent to but just more direct than the one provided in the CFA curriculum, the grader should award full credit for the answer. Only if the answer is incorrect or the approach taken by the candidate is flawed would zero or partial credit be given.

There you have it, straight from the stable.