Just finished sample 3. again made lot of mistakes in bond section inspite of 3 hrs of reading the CFA matl couple of days back. Item set 3 was simple yet made lots of mistakes. In addition, scored below avg in Ethics where I surprisingly scored well in the prev exams…Few questions 1. CFA program quoted as post graduation. Have you guys heard of that? 2. port A comprise of zero coupon bonds 6 and 10 yr, port B is barbell 4. yr and 15 yr. which one has immunization risk given short term int rises and long term drops. I thought that barbell will not have reinv risk since the rate increase is one time affair and that it favours the short end(int increases) which helps set a higher reinv rate. Ans seem to suggest B has reinv risk. 3. Is multple liab immunization ever protected for yield curve risk??
sorry for some reason, the system came up with error and hence tried to post it again. but looks like the orig post came out already.
- CFA program is not a post grad degree. 2. reinvestment risk = immunization risk. i think B has more immunization risk as you get CF sooner. 3. don’t know about this.
there was a question that implied that CFA is a post grad program… Yes for B we get cashflow sooner but is not the int rate high at the short end. we could reinvest at higher rate so where is the risk?
#3: I think it is only protected for a 1-time parallel shift in the yield curve.
CFA program is a Post Grad Program it is not a Degree…It was not a violation b/c he called it a program and not a degree.
- Multiple liab only hedge against parallel shift by having dispersion> than the liability so reinvestment risk is minimized. Will now protect against arbitrary changes (i.e. yield curve)
i think ac123 meant will NOT protect against arb changes.
thanks BW. you are always there to reply. i dont know how you have so much time to reply to everyone. I could only wish… I will make it up by trying to be helpful next year if passing if I end up passing L3 this time.