By now we have surely come across some formulas that we just cant remember during the mock or during practice… The ones that i have consistently forgotten are: Delta Hedge, Info ratio, PE steps in valuation, NOI, P/AFFO, M Score, SMM and CPR, and Price multiples. Dont know how i forgot a couple of price multiples during 2 mock tests.
I jus wanted to know whether others are forgetting them as well and what are they doing to remember them bcoz some of them are really simple. Individually seeing them all are simple imo.
I’m a Premier League follower and I’ve invented silly stories on players of my team (Arsenal) to remember everything PM. I’ll be able to recall the bulk of these formulas coldly most likely and I do understand their application and all…but just inventing and repeating these stories has helped improve my retention of the exact formulas.
Information ratio: alpha/w (“Arteta and Wilshere are on the Injury Reserve”)
VA: Alpha - (Lambda * w^2) (“Ahead of VA cup match, Arteta out but arsenal is diminished by Long injury to Walcott as they Square off” )
W*: W*= IR/ 2Lambda (“Wilshere the star= Injury Reserve over 2 Long months”)
VA*=W*IR / 2 (“The VA cup match starts with Wilshere the star on Injury reserve, on top of 2 other players”)
IR=IC*sqrt(BR) (“Injury Reserve for Ignacio as well. Had a Root canal for ad BReadth”)
ICcom = IC * sqrt (2/ (1+r)) “Ignacio’s comeback from root canal: 2 goals / 1 red card”)
I’m a Premier League follower and I’ve invented silly stories on players of my team (Arsenal) to remember everything PM. I’ll be able to recall the bulk of these formulas coldly most likely and I do understand their application and all…but just inventing and repeating these stories has helped improve my retention of the exact formulas.
Information ratio: alpha/w (“Arteta and Wilshere are on the Injury Reserve”)
VA: Alpha - (Lambda * w^2) (“Ahead of VA cup match, Arteta out but arsenal is diminished by Long injury to Walcott as they Square off” )
W*: W*= IR/ 2Lambda (“Wilshere the star= Injury Reserve over 2 Long months”)
VA*=W*IR / 2 (“The VA cup match starts with Wilshere the star on Injury reserve, on top of 2 other players”)
IR=IC*sqrt(BR) (“Injury Reserve for Ignacio as well. Had a Root canal for bad BReadth”)
ICcom = IC * sqrt (2/ (1+r)) “Ignacio’s comeback from root canal: 2 goals / 1 red card”)
Even nastier than those we forget are those that exist but are not explicitly stated in the material.
Example: Recovery rate and loss-given-defaut in the credit analysis stuff
CFAI goes…"The second measure is the loss given default, the amount of the remaining coupon and principal payments lost in the event of default_._ The loss given default is often expressed as a percentage of the position or exposure. A related measure is the recovery rate, which is the percentage of the position received or recovered in default. The loss given default plus the expected recovery rate when each is expressed as a percentage of the position equals 100%."The third measure is the expected loss on the bond. The expected loss is equal to the probability of default multiplied by the loss given default.
So essentially they’re saying
RR+LGD%=1
EL=P(Def) * (LGD)
but those stupid formulas are never fleshed out. So the exam could wow you with some fancy terminology like “Assuming a loss given default of 30% of the position, what it the most likely percentage that can be recovered?”. If you haven’t seen the formula, you can surely make sense of it after scratching your head in hesitancy in sorting out all the fluff info they throw at you and under stress conditions at that. The alternative is to just know the formula bluntly, check 70% and move on.
i hear you man. it’s very frustrating. so many forumulas they don’t actually give you the exact formula written cleanly with the number beside it etc. and so when it comes to questions asking you to calculate it, you’re a bit confused given it was merely explained qualitatively. just gives us the damn formulas!
