This is where I see some of the most difficult questions coming from…your thoughts 1) Valuation in Emerging Markets 2) Derivatives - Currency Swaps 3) Econ - triangular arbitrage, assessing economic circumstances that will cause varies currencies to appreciate/deprecriate, and understanding that some of these forces can offset each other in some instances and not in others. 4) Quant - Symptoms of model misspecification 5) Adjustments to Financial Statements
I quite agree with that list although I wouldn’t put #2 or #3 in there. I think #4 is just a little vague in the way Schweser explains it (haven’t seen CFAI) and #5 is definitely hard too.
I like the list. #2 Swaps in general. (talked to a friend that passed the L2 last year and said there was a Swaps question that he had no clue on. Still to this day he couldn’t figure it out) I would leave off #3 I don’t think is difficult though if you diagram it out. Should be pretty easy. #6 I would add Port Management (the whole session)- as a bombshell. Why? A lot of material, a lot of formulas. I lot of easy ways for them to ask really difficult/confusing questions. Good list though.
I second that Plus International CAPM
I’ve modified my list of potential issues that could fall into the 30% of the exam that will be exceptionally challenging: 1) Valuation in Emerging Markets 2) Weights in the active/passive portfolio utilizing the TB model along with figuring weights for individual securities. Toughie here is that the LOS says little about calculations, but at the same time you have to know how to describe the approach of TB. 3) Adjustments to Financial Statements 4) Lots of little weird things like Eurodollar Convexity, explaining why an investor can earn a substantial premium for exposure to dimensions of risk unlreated to market movements, 5) Justification for using a particular regression/time series model and symptoms of model misspecification. While it makes sense on paper, trying to think through all of the steps in an exam is daunting. I’ve removed Currency Arb and Currency Swaps. Not that those are necessarily easy, but there are enough problems that one can get a grasp on a number of scenarios.
SS7 could go either way. We will refer to SS7 as bi-sexual.
My crazy thought, there will maybe be two questions on T-B on this test.