again, it was a very straightforward question…all were fine, apart from the shortfall risk. I don’t remember the wording, but it was clearly shortfall. I work in risk, I passed FRM with everything first quartile and PRM with 90% average on the 4 exams…
no cap risk it was a fixed rate mbs bonds can be issued as fixed or floating rate
MrDonadei Wrote: ------------------------------------------------------- > again, it was a very straightforward > question…all were fine, apart from the shortfall > risk. I don’t remember the wording, but it was > clearly shortfall. > > I work in risk, I passed FRM with everything first > quartile and PRM with 90% average on the 4 > exams… they may define shortfall risk differently, AFAIK, shortfall risk is just a concept, not giving you a number, but yet in CFA official material it defines shortfall risk as the probability of not meeting a preset target
semi-variance, if it matters…
Why are you even comparing the CFA to a post-grad degree? Can you sit in three tests and get a post-grad degree? CFA is a joke to uhh, climbing Mount Everest in slippers too. I enjoy your posts and the knowledge that you share, but this is a case of sour grapes on your part. As cited by others, the “CFAI meaning” is very clear as cited in their textbooks. This has been confirmed by someone who works with the concept on a regular basis for work as well. All of us made mistakes and have trouble remembering what the textbooks say; chalk it up to bad memory.
Aerius Wrote: ------------------------------------------------------- > Why are you even comparing the CFA to a post-grad > degree? Can you sit in three tests and get a > post-grad degree? CFA is a joke to uhh, climbing > Mount Everest in slippers too. > > I enjoy your posts and the knowledge that you > share, but this is a case of sour grapes on your > part. As cited by others, the “CFAI meaning” is > very clear as cited in their textbooks. This has > been confirmed by someone who works with the > concept on a regular basis for work as well. All > of us made mistakes and have trouble remembering > what the textbooks say; chalk it up to bad memory. well if you assume 300 hours a level that’s 900 hours which is probably more than you would study for an mba.
so is the answer semi-variance ? I picked standard deviation because of the “callable bonds” part of the sentence. Standard deviation is bad for ALL bonds not just bonds with options.
analytical VAR, semi deviation, std dev are all same thing. rely on normal distn. shortfall risk is the odd one out - is a probability measure, if using MC, distn could be anything, even asymmetric. anyone?
went with semi variance as incorrect as it relies on normal ‘symmetric’ distribution…not suitable when returns are non-normal…
ChiTownBull Wrote: ------------------------------------------------------- > no cap risk > > it was a fixed rate > > mbs bonds can be issued as fixed or floating rate Yes, MBS was clearly stated as fixed-rate. I wasn’t sure if cap risk was relevant but since it was fixed rate, I said no.
i thought cap risk has to do with price of the bond… if rates fall mbs would climb a max to its call price, if the option is in the money…thus the price is capped in certain circumstances… the fixed rate means the coupon is fixed… that doesnt mean the price is fixed, that shall change with the change in market yields!
semivariance DOES NOT rely on normal distribution. in fact semivariance is a poor measure if normality is assumed.
does anyone have any insight to the r-g implied spread? I mean what LOS does that come from, does it say that in the CFAI material? Complete screwball question by CFAI.
that was dividend yield…its in the source material…should be in schweser…no???
it was just basica lagebraic manipulation of the equation: R = D1/(r-g) i.e. r-g = D1/P = div yield.
^ crap thanks guys I was totally going to go with that one but didnt. can’t get nutta right damm!t!
MrDonadei Wrote: ------------------------------------------------------- > again, it was a very straightforward > question…all were fine, apart from the shortfall > risk. I don’t remember the wording, but it was > clearly shortfall. > > I work in risk, I passed FRM with everything first > quartile and PRM with 90% average on the 4 > exams… i voted shortfall too. PRM here as well.
Semivariance was rubbish… all else were perfectly fine