mo34 Wrote: ------------------------------------------------------- > kingcobra Wrote: > -------------------------------------------------- > > Dang, wasn’t the short on currency going > against > > Red River…does anyone recall the specifics > > > they were short Yen and the forward rate was like > 15 Yen/SAR and the spot was 17.5 Yen/Sar… So if > you’re going to get SAR for your Yens you want > them at the !5 Yen/Sar. > > they were exposed to credit risk. Thanks, man !..That’s one more down the drain…or actually 3 points down
rohufish Wrote: ------------------------------------------------------- > principal trades are used with dealers when you’re > in a rush to get the trade done. > > its got nothing to do with institutional investors > as the dealers ultimate counterparty when closing > out inventory on their principal trades. maybe not in reality but I do seem to remember the reading mentioning that with principle trades that they shop it to institutions.
we all got it wrong… CFAI must be smiling…
i circled average initially, and in the last 20 seconds of the exam, switched it to below. dang it, dang it…
needhelp Wrote: ------------------------------------------------------- > Do you remember the soccer player question from > yesteryears? He had a substantial money coming out > of portfolio and he was retiring in a year. I > thought the ability to take risk was below > average. Correct answer was ‘above average’ Exactly. In his situation, the portfolio was his sole source of income and he was above average. Yes, it mentioned he could reduce his living expenses, but usually that seems like a secondary consideration. Remember, he had a 700K family support payment so his living expenses were 1.3M. Sure it sounds like a lot but I don’t recall the currency. Currency is kind of irrelevant in these calcs. The % return is a better estimator. Besides, how do we know the family couldn’t reduce their living expenses? The case really gave no info in that regard. The one thing I can say for sure is that it isn’t average. CFAI wants you to go one way or the other.
have ppl discussed that VWAP / Implementation shortfall one?..I think I couldnt get my head around that one…I checked the books and there is a one page summary in the source material that I remember reading a dozen times…it gives some examples and says ‘probably’ be executed using x order or possibly using y order…in the exam they expected us to choose the one and only correct answer… was it the broker order 'the large one compared to the average trading volume suitable for implementation shortfall to avoid delay costs etc??? or another one? the VWAp again was tricky…in the book it says the order that is a small portion of its volume… but in that case cant it be easily gamed if executed throughout the day??? dont think any of that made sense to me in that pressure…
I went for principal trade, which I believe is brokered trade. The reason I went for it is I think the trade size was very large compared to the daily volume.
So what are electronic crossing networks, anyway?
why can’t institutions be counterparties to limit orders placed over 6 months?
Crossing network question - I think the point was it was a large trade, however the seller was selling not because the stock was out of favor, but because they were reallocating their portfolio. Then then threw in the bone that the stock was followed by instituational investors. Therefore the crossing network was the choice because it can be done to avoid price discovery and avoid sending negative signals to the market.
i think this can be one of their “classics” of “if you selected principal, etc, etc, etc” and “if you selected crossing network, etc, etc, etc”… any comment i read here makes sense, so perhaps both can be correct
Principal vs ECN - i think this will be a case when either will be acceptable as long as justified (just like collar vs etf from last year).
bchadwick Wrote: ------------------------------------------------------- > So what are electronic crossing networks, anyway? Think maybe they’re talking about the POSIT system or NYFIX Millenium. Dark books where traders can place bids and offers that could be filled on an average price basis between the spread.
hezagenius Wrote: ------------------------------------------------------- > The way I looked at it, the portfolio was > providing one thing and one thing only, the > mortgage. It was not providing living expenses. > Sure, you can say the mortgage is a living > expense, but the case mentioned that the goal of > the portfolio is to pay for the mortgage. That is > it. Salary and living expenses completely offset > each other. The portfolio was worth about 1M and > they need roughly 5% per year from it. This was > the same as 2 years ago. The guy needed 2M a year > and his portfolio was worth about 40M, so the > portfolio needed to earn about 5%, and in that > situation, he had no other income. CFAI said he > was above-average since he was young and had a > substantial asset base. I don’t see how that is > different than this year. If anything, this > couple is even better off in a relative sense > since they will be receiving another inflow of > cash in 10 years plus an inheritance at some point > so their portfolio could take a hit and they would > still be fine. > > Seems cut and dry they were above average. Finally we have the CFAI answer to the 2008 IPS risk tolerance question: above average. Points for me!
ugggh! That brings back bad memories. I can’t believe I passed that thing. I’m pretty sure I’d fail miserably if I had to take it tomorrow morning.
^When I looked at the exam, I am so impressed with myself that I actually passed the exam.
It really brought back some really bad memories… Like you guys, I can’t believe I got past the morning session. I still got through the fixed income section fairly well (Not fair cause I work in FI), but the copper futures question is like ???