Exchange-traded put options is suppose to hedge an increase in pension liabilities. How are we supposed to know that interest rate puts are based on short-term rates in general?! And thus, are not a good way of hedging pension liabilities due to the maturity mismatch. Did you know that? And in which LOS is it stated?
are you referring to the schweser exam 2 book 2 essay question on that?
Schweser book 2 exam 1 essay question # 7A
Options on bond futures are longer term. Most Schweser Book 2 is goofy.
Paraguay, what do you mean by goofy?
charly_blue Wrote: ------------------------------------------------------- > Paraguay, what do you mean by goofy? In their attempt to make it hard the questions come out goofy. Little minutia like presentation instead of performance etc. More of a lesson in vocab and memorizing lists than what the CFA tests are.
Thanks~
BTW this is from a very little section talking about hedging short term eurodollar futures for interest rates and then using bond futures for long term. It also comes from a place in the curriculum that is from an errata section.
Paraguay Wrote: ------------------------------------------------------- > charly_blue Wrote: > -------------------------------------------------- > ----- > > Paraguay, what do you mean by goofy? > > In their attempt to make it hard the questions > come out goofy. Little minutia like presentation > instead of performance etc. More of a lesson in > vocab and memorizing lists than what the CFA tests > are. Totally agree. They try to make things harder than they are meant to be by burying details in long winded paragraphs within verbose vignettes. And the numbers are devious as well