For those that are here, Schweser has some fairly large errata in this reading that haven’t made it to their page yet. 1. Yield Beta is an optional reading in CFAI - as a result, it is NOT used in any of the adjustment formulas. 2. The formulas to calculate the number of equity/bond futures to buy/sell do NOT use the price multiplier CFAI Book 5, Reading 41, Pages 365-367. ---- Just a heads up to anyone relying solely on Schweser.
I think I’m missing something here wrt #2. It’s my understanding that as the CFAI states it: Nsf = ((Bt-Bs)/Bf)*(S/Fs) Schweser has: ((Bt-Bs)/Bf)*(Vp/Pf(multiplier)) Where: Fs = Pf(multiplier) Both are defined as the price of the stock index futures. I have no idea why the word multiplier is used in The Schweez.
team_alex: It is my understanding that they are NOT the same as in the CFAI textbooks there are variables given for each one: q = price multiplier f = futures price You’ll notice that those two variables are sometimes used together, and sometimes only one is used. Hence, I still believe that Schweser is incorrect with their formulas - especially in regards to the Yield Beta.
Since someone mentioned about Schweser errata, I just want to add that I did spot many errors in Schweser notes. Some of the notes were entirely out of point as compared with the actual CFAI text. Here are some that I’ve found: LOS26j. evaluate the theoretical and practical effects of including additional asset classes in an asset allocation; My comment: Schweser focuses on the wrong theoretical and practical effects LOS28g. demonstrate the process of rebalancing a portfolio to reestablish a desired dollar duration; My comment: Schweser talk about controlling position rebalancing duration but this isn’t in the text. LOS28k. compare and contrast immunization strategies for a single liability, multiple liabilities, and general cash flows; My comment: Schweser gave three conditions that must be satisfied to immunize mulitple liabilities but CFAI text provided only two. LOS28m. demonstrate the use of cash flow matching to fund a fixed set of future liabilities and contrast the advantages and disadvantages of cash flow matching to those of immunization strategies. My comment: Schweser notes touch on extension of cash flow matching using combination matching but LOS did not mention the need to learn that. LOS31d. compare and contrast duration-based approaches with interest rate sensitivity approaches to hedging mortgage securities. My commnet: Schweser gave 5 assumptions of two-bonds hedge but CFAI only gave 4. LOS32m. compare and contrast long–short versus long-only investment strategies, including their risks and potential alphas, and explain why greater pricing inefficiency may exist on the short side of the market; My comments: There is some loss of meaning when Schweser notes paraphrase the 4 reasons why there could be inefficiencies on the short side. E.g., Schweser notes forgot to mention that sell-side analyst could earn more commission recommending a ‘buy’ because there is a larger pool of potential buyers as compared to sellers. LOS32o. compare and contrast the sell disciplines of active investors; My comment: Why Schweser notes talk about turnover of active investors when LOS don’t require it?
bell99: I agree - I’ve noticed similar things. It seems like this year, more so than previous, Schweser has been really lazy in updating their notes for the minor changes in the curriculum.
Confirmed errata by Schweser for those that care.
Has Schweser confirmed the errata for the formulae under the Errata section? Thanks.
Definitely not confirmed errata by Schweser. Multipliers are used by CFAI (just look at p 388, secon question). Yield beta also has no error…don’t know if we need it, but thats very straight-forward, so no bigger capacity needed to remember;)
jdane416 Wrote: ------------------------------------------------------- > For those that are here, Schweser has some fairly > large errata in this reading that haven’t made it > to their page yet. > > 1. Yield Beta is an optional reading in CFAI - as > a result, it is NOT used in any of the adjustment > formulas. > > 2. The formulas to calculate the number of > equity/bond futures to buy/sell do NOT use the > price multiplier > > CFAI Book 5, Reading 41, Pages 365-367. > > ---- > Just a heads up to anyone relying solely on > Schweser. But you are fogetting about reading 30 page 120, yield betas are mentioned by CFAI text (not optional text). I won’t be surprised to see the concepts from reading 30 and reading 41 combined in a question.
On the yield beta, because im too lazy to look right now, are you guys referring to when you use futures contracts to hedge some type of differing duration bond? So the yield beta would no longer be necessary (presuming it’s not provided), and the formula would just be [(bt-bp)/bf] *[vp/[pf*m]] ? I believe this formula is the only place it’s used anyhow