# The Nightmares & Dreams Begin

Am I the only one who is tossing and turning at night in bed dreaming of all the formulas, concepts and things we have to know for the exam. MBS was ingrained in my head last night and I kept thinking about duration, int. rate risk etc etc… it was horrible! I remember last year even after I wrote the exam I would be dreaming about the material and or test for several weeks - it’s just an awful experience.

I’m sleeping fine…its when I’m awake the nightmares begin.

funny, i was thinking of MBS and 2 bond hedge last night…

Speaking of the 2 bond hedge, I’ve chosen to skip that material altogether. I just can’t seem to wrap my head around it and if it’s on the exam, I’ll just have to move on. Does anyone firmly grasp the material on the 2 bond hedge?

Nightmare is at work, as i keep checking forum/schweser qbank as oppose to working. I am sleeping like a baby though

^Me do. Well depend on how detail you want to get. I had this dream that could use a computer to type in our essay answer instead of writing it down by hand.

Is that the one where you have the 4 measures: Yield Increase, Yield Decrease, Twist, and Flattening?? I think that’s the four. Now what you do PJ, is for each Bond and the Original Bond beign Hedged, take the ABSOLUTE Average of the Yield Increase/Decrease and the ABSOLUTE Average of the Twist/Flattening. These are PRICE Changes not % changes. Next. Take the 2 Bonds being used to hedge say X and Y to hedge Z. Setup so that Yield Increase/Decrease of Z = ABS AVG(Yield Inc/Dec of X) * Wx + ABS AVG(Yield Inc/Dec of Y) * (Wy) Now do the same for the Flattening/Twist. Next using algebra solve for say Wx. Then take that Wx equation and stick it into the Other equation say the one for the Twist/Flattening and Solve for Wy. When you get the value of Wy put that number into either of the original equations to get Value of Wx. Its really not all that hard. Don’t know if I explained it well though.

Congratulations. You’ll be better prepared for the exam now that you’re stealing studying time while you sleep.

that’s how I see it… it’s how you know you’ve achieved true “Gangsta” status…

bigwilly, Can you go over a complete example with me along with a good explanation at each stage? I find the Schweser notes extremely lacking in this area and don’t have my CFAI books with me. I just remember every time I try to go over this material, my eyes glaze over… lol

yeah, willy!!, write it out extra long and extra detailed… even if it takes you all day to write it!!

Yes… because I can’t be the only one who absolutely does not get the 2 bond hedge. In fact, I don’t understand any of the hedging material as it relates to MBS. If someone wants to fill me in on this, I would be extremely grateful! The only thing I remember is that when hedging a MBS, you can suffer losses because apparently the hedge has negative convexity as well? Again, no idea about the hedging aspect of MBS… someone please HELP!

I can’t do it right now sorry. at work

Okay no worries… perhaps later when you get home

Does anyone know what new LOS were added in 2008 - I searched for 2007 LOS to no avail, oh? TMURF? JOEY? Please Talking about sleeping … sleep like a baby, only after I wake up in the middle of the night and cant fall asleep until I read that gddmn CFA book for about an hour…then i sleep like a baby again… god another 23 days of that horror

Haven’t had time to study on weekdays… only thing that causes anxiety is trying to keep up with reading all the posts on this forum. It reminds me of how ahead you all are every time.

No dreams, no nightmares, no fear. Sorry fellas.

Joe, do you have a “No Fear” sticker on the back of your car/truck/moped?

I dreamt Bear Stearns offered me a job. I politely declined.

eliapa Wrote: ------------------------------------------------------- > Does anyone know what new LOS were added in 2008 - > I searched for 2007 LOS to no avail, oh? TMURF? > JOEY? Please > > > Talking about sleeping … sleep like a baby, only > after I wake up in the middle of the night and > cant fall asleep until I read that gddmn CFA book > for about an hour…then i sleep like a baby > again… god another 23 days of that horror 2008 LOS changes http://www.analystforum.com/phorums/read.php?13,574518,583999#msg-583999