This is old but good stuff. Please note that SS# reading# may have changed. Please add more…
SHARPE RATIOnew.asset > (SHARPE RATIOport)(CORRnew.asset,port) This is tested in 2010, one year later. Schweser shall take AF seriously – this formula is still not in 2011 notes. To me, Schweser is the core – enhanced indexing, EOC and AF are satellites – for excess return. 
SS14, Risk Management Advantages of VAR: 1) VAR has the attraction of quantifying the potential loss in simple terms and can be easily understood by senior management. 2) Regulatory bodies have taken note of VAR as a risk measure, and some require that institutions provide it in their reports. 3) Another advantage of VAR is its versatility. Many companies use VAR as a measure of their capital at risk. 4) Risk budgeting. Limitations VAR: 1) VAR can be difficult to estimate, and 2) different estimation methods can give quite different values. 3) VAR can also lull one into a false sense of security by giving the impression that the risk is properly measured and under control. 4) VAR often underestimates the magnitude and frequency of the worst returns, although this problem often derives from erroneous assumptions and models. 5) As we discuss later, VAR for individual positions does not generally aggregate in a simple way to portfolio VAR. Also, 6) VAR fails to incorporate positive results into its risk profile, and as such, it arguably provides an incomplete picture of overall exposures. The above is copied from curriculum vol 5, page 245. In Schweser notes, Advantages: 1) VAR is interpreted the same, regardless of the assets in question. Limitations: 1) need to estimate input and make assumptions 2) not directly consider liquidity risk. ---- PS. Schweser’s slides do use the list from curriculum.
Chapter on AI: As I remember they didn’t mention sortino-ratio, also a lot of small details needed for CFAI EOC were missing…
Yeah, I wouldn’t count on Schweser to give you all the formulas you’ll need. They always miss stuff that ends up being important.
I was just reading this. Schweser mentions this in their notes (top of page 79). If you multiply through P(Dt - Dp) it = DDt - DDp Dctd * Pctd = DDctd So the formulas are equivalent. I used CFAI for SS1-5, but have been using Schweser with CFAI EOC for the other study sessions. Disapointed Schweser can’t get you through some EOC
This thread should be pinned to the top. Highly testable material IMO. In SS9 Reading 29, I thought there was more stuff in CFAI readings on Spread Analysis: 1. Use of OAS in primary and secondary pricing has diminished within inv grade 2. int rates swaps are used for relative value purposes for both fixed and floating structures 3. Credit default swaps have emerged as valuation tool 4. Market can price any security using multiple spread references: nominal, static or zero volatility spread, OAS, credit swap spread, credit default spread. 5. Illustration on page 77-78
Reading 39: I would totally ignore the example calculations on the FRA in Schweser: I had a look into it and it’s not covered this way in CFAI; also in my opinion the calculations only hold under very restrictive assumptions. Maybe looking at R 39 5.6.1 in CFAI makes sense, not covered in Schweser, but interesting view on Credit Risk via Option-Theory. In my view not directly related to a LOS, but you never know…
CFA also mentions inverse floaters…not mentioned in Schweser at all…
R41: calculating effective beta on a equity + futures portfolio…
The reason that CFAI is likely to test something not covered in Schweser is probably based on the assumption that the candidates who are using Schweser notes may have some advantages. But using Schweser notes also has some disavantages. 1) as in this topic; 2) notes’ become as thick as the curriculum; 3) to avoid copyright issues, Schweser can’t use the examples and Qs 4) It’s burden to read both. 5) have to take Schweser cover effect, especially when you don’t like it. lol. http://www.analystforum.com/phorums/read.php?12,952939,952966#msg-952966