Oh I see. Well, that’s kind of a big section… lol
Agree with the technical analysis. Too many graphs, charts and they dont make much sense. DTA DTL when tax rate changes. then very confused about stop sell stop buy, limit buy limit sell.
Side note, why is technical analysis even in the Quant section? The underlying theory isn’t even based on math or statistics, but psychology. Also, it hasn’t even been proven (academically, at least) to be a useful tool. But I digress… That was the only section I skipped as well, not even going to bother trying to catch up now. Too much work still to do in FRA.
Thanks Brainly and Robjames. That really helps. I got one more question: How do nominal, z and option adjusted spreads vary with increasing interest rates and increasing volatility. I am sorry I really cannot think straight anymore. I took a quick look and apparently z-spread > OAS for put and z-spread < OAS for calls. I have no idea why. P
Prodigal, Make sure you memorize these equations: OAS = Z-spread - Call option value OAS = Z-spread + Put Option value As we discussed earlier, volatility of interest rates increases value of options (both put and call). From the formulas above, volatility only impacts OAS because thats the only measure that accounts for option values. These two equations also help a lot when they give you the OAS and Z-spread and ask you whether the bond is callable or putable…you can just plug the spreads in and figure out if its a + or - to see if its a putable or callable bond. Hope this helps
robjames1984 Wrote: ------------------------------------------------------- > Prodigal, just remember this: > > 1). Calls and puts increase in value with > volatility because volatility means uncertainty, > and in uncertain times, people want options > (literally) right? > > 2). Callable bond price therefore decreases with > volatility (since price = price of option-free > bond - value of call option (which is now higher)) > and putable bond increases in value (price = price > of option free + put option (which is also now > higher due to volatility) > > 3) With increasing rates the price of a call rises > and the price of a put falls. My understanding is > that options are essentially priced according to > what the expected rate of return on the market is. > If you have a stock worth 100 and the RFR is 5%, > then you would expect the stock to raise to the > price of 105 (with call worth 5). If the RFR then increases to 10%, > you would at least expect a stock to be worth 110 (with call to be worth 10) > and 110 is clearly more than 105. With a higher > level of expected growth and interest, the put > will now be worth less. sorry there are some typos in the original text so I have reposted
robjames1984 Wrote: ------------------------------------------------------- > Oh and a wrap account, like thisisbrianly said, is > a separately managed account (SMA) that is managed > by an advisor. The advisor will charge an > annual-based fee, say 1%, on the assets in the > portfolio - commissions etc are usually are > included. The total cost is literally ‘wrapped’ up > inside the 1% management fee,
To add to this list… Treatment of Pension Plans! Really?!
CFAPlay Wrote: ------------------------------------------------------- > Side note, why is technical analysis even in the > Quant section? The underlying theory isn’t even > based on math or statistics, but psychology. Also, > it hasn’t even been proven (academically, at > least) to be a useful tool. > > But I digress… That was the only section I > skipped as well, not even going to bother trying > to catch up now. Too much work still to do in FRA. That whole section, and EMH, in my opinion, is pointless… If Markets were efficient, what would be the point of participating in them… Only to hedge?
Yeah, the EMH was interesting to say the least. The point of participating would be to earn a market return on investments since skilled investors cannot beat them on a sustained basis. More importantly, if markets are perfectly efficient, there really isn’t a need for securities analysts.
CFAPlay Wrote: ------------------------------------------------------- > Yeah, the EMH was interesting to say the least. > The point of participating would be to earn a > market return on investments since skilled > investors cannot beat them on a sustained basis. > More importantly, if markets are perfectly > efficient, there really isn’t a need for > securities analysts. Why are we studying this material… to hedge, and earn risk free returns… hmmm. My 2 cents.