Hi, I am studying PM and there is this FMCAR notion on page 407 in the CFAI books that scares me. It is not included in Schweser, not specifically mentioned in the LOS…but still it is evoked by CFAI. Did you guys see any question related to that, or a vague idea of it should be fine? Thanks
sometimes i listen to FM in my CAR. sox games are on 680 AM though. i have no idea what this FMCAR notation is that you speak of, but don’t think it’s scared me enough to open the CFAI texts.
What is this FMCAR?
FMCAR is Factor’s marginal contribution to active risk squared. The formula is too ugly to be typed and you can find it page 407 of the CFAI Portfolio Management volume. I just ask because they develop a detailed example using this notion and I have not seen anything in Schweser looking like this beast. I hope that we won’t regret that on June 7th…
we should look at LOS
I did check and the LOS is: “Explain the sources of active risk, and define and interpret tracking error, tracking risk, and the information ratio, and explain factor portfolio and tracking portfolio”
those are easy, i don’t see anything about FMCAR
Right, but still, CFAI develops 4.5 long pages using this FMCAR notion. This is how they introduce it in writings: “Whatever the set of factors, the procedure for evaluating the contribution of an active factor exposure to active risk squared is the same. This quantity has been called a Factor’s marginal contribution to active risk squared blablabla” So technically it is part of the LOS…
Thanks for the tip, will look at it more carefully
meh…if it shows up, I have a 25% chance of getting it right! Just remember that the exam is not math extensive so if its a big ugly formula…chances are you don’t need to worry about it.