# CFAI text V5 R41: Multiplier for futures

On P356, q is defined as “multiplier” with the unit of and the multipliers of the future contracts in elsewhere in this reading are always with the of . Since I think that the futures prices are with the units of (as f on P356 and elsewhere in this reading) and this shall be a common sense, then why "multiplier" can be with the unit of ?

I don’t know exactly what you are refering to but there could be two kinds of multipliers. One - value of 1 point. For example, E-mini S&P March 2010 contract is at 1,102.75 right now. It represents 1,102.75*\$50 of notional exposure. The second one referes to CTD option. For example, if you buy a 10 Yr TNote futures contract that expires in March of 2010, there are multiple contracts that qualify to be delivered and each of them has its own multiplier. For example, a 5 Year Note that matures in 2015 can be delivered. In order to compare apples and apples, a multiplier is assigned. Then CTD gets delivered. Does that help?

maratikus Wrote: ------------------------------------------------------- > I don’t know exactly what you are refering to but > there could be two kinds of multipliers. > > One - value of 1 point. For example, E-mini S&P > March 2010 contract is at 1,102.75 right now. It > represents 1,102.75*50 of notional exposure. \> \> The second one referes to CTD option. For \> example, if you buy a 10 Yr TNote futures contract \> that expires in March of 2010, there are multiple \> contracts that qualify to be delivered and each of \> them has its own multiplier. For example, a 5 \> Year Note that matures in 2015 can be delivered. \> In order to compare apples and apples, a \> multiplier is assigned. Then CTD gets delivered. \> \> \> Does that help? What I mean is that the "multiplier" mentioned in R41 shall not have a unit of . It shall be just a number (without the unit of \$). Please refer to CFAI text V5 P356 (R41), you will understand what I am talking about.

You’re right AMC, did you check the errata?

I don’t have the text.

derswap07 Wrote: ------------------------------------------------------- > You’re right AMC, did you check the errata? derswap07, No correction about this in CFAI’s errata. Maybe I shall ask them to correct.

AMC, if i may contribute, the multiplier is ‘multiplied’ by the index price which is typically ’ dimensionless. ie without the . it is the multiplier that introduces the sign. ( in addition to reading 41, see R40 page 312 eg 6 ) in simple terms it is the multiplier that carries the \$ sign the indext doesnt and when we multiply the index by the multiplier we have a ‘price’ witha dollar sign…i hope this helps… i wel come me back to analysts forum…

grace grace Wrote: ------------------------------------------------------- > AMC, > > if i may contribute, the multiplier is > ‘multiplied’ by the index price which is typically > ’ dimensionless. ie without the . it is the \> multiplier that introduces the sign. ( in > addition to reading 41, see R40 page 312 eg 6 ) > > in simple terms it is the multiplier that carries > the sign the indext doesnt and when we multiply \> the index by the multiplier we have a 'price' \> witha dollar sign.....i hope this helps........ \> \> i wel come me back to analysts \> forum................................ grace grace, Then, both f (futures price) and q will have a unit of ? I think only one of the two shall have the unit of . In Exhibit 4 (P357), both have the unit of in the scenario, but only q has the unit of in the calculation. In Example 4 (P359) f does not have the unit of while q has. In Exhibit 5 (P361), f does not have the unit of \$ while q has. I am confused !

AMC, I think I understand you now. Given the volume of material we have to cover to kill this snake, I think it is fair to take a view on this and proceed: an index price X a multiplier = a product in \$. No matter how many dollars signs there are this is what seems to be consistent through all the examples. Lets understand that we dont understand why Messrs Institute chosse to do this but we need to smile come Aug/Sept 2010. All the best… Grace

Hi, Grace : I think I shall follow your way. That is “an index price X a multiplier = a product in \$”. But CFAI shall clarify this as it shall be a basic concept. Hoping that we will smile in Aug/Sept 2010 !

AMC, can I get your thoughts on my post in another link ‘please critique my strategy’…i am way behind schedule…

Grace, Just study systematically, do as much as you can and leave the remaining to the God ! (as I have been doing)

AMC, I think you should write to the institute

AMC Wrote: ------------------------------------------------------- > Grace, > > Just study systematically, do as much as you can > and leave the remaining to the God ! > (as I have been doing) ----------------------------------------------------------------------------------------------------- AMC, God? How does he come in here? Do you think he is interested in my passing an exam? You think He loves me? Grace

grace grace Wrote: ------------------------------------------------------- > AMC Wrote: > -------------------------------------------------- > ----- > > Grace, > > > > Just study systematically, do as much as you > can > > and leave the remaining to the God ! > > (as I have been doing) > > -------------------------------------------------- > -------------------------------------------------- > - > AMC, > > God? How does he come in here? > > Do you think he is interested in my passing an > exam? > > You think He loves me? > > Grace Grace, I think God loves you. As some CFAI’s exam questions were (and may be) out of the scope the LOSs, therefore, only a few candidates can prepare 100% well for the exam. So just go go !

derswap07 Wrote: ------------------------------------------------------- > AMC, > > I think you should write to the institute derswap07, Actually I have sent my inquiry to CFAI by e-mail.

do you mind sending me your personal email address? Do you mind talking to me about God?

This is from last year’s discussion. So I don’t think CFAI will correct it any time soon. It may have been there since the index futures were invented. For example, S&P 500 Futures’ Contract Size: 250 x S&P 500 futures price. :D For index futures, the future price is just a level and has no unit. The multiplier in is usually fine, but it does cause problem when we calculate the number of [synthetic] units of stock. For example, on page 361[Vol5]. "The number of units of stocks is -Nf*q/(1+delta)^T=339(100)/(1.0075)^(2/12)=33,857.81" The is “magically” converted to a unit of stocks.

I read all the threads and believe the attitude is correct. And I believe the poster is an European, who are notoriously diligent.