What is cash?

This is something that bothered me since day 1 of level 1, but can someone give me an actual definition of what the CFAI defines as cash?

From what I’ve seen in the curriculum cash needs to be a highly liquid, inflation protected, low volatility asset. So my question is, what actually qualifies as “cash” or “cash-like” for CFAI?

Would TIPS qualify as cash? What about a treasury that has been sold 100% forward so it has no duration?

I’ve also seen "cash’ defined as any highly liquid, low volatility asset that is outside the manager’s benchmark, which is a much wider interpretation of “cash” than I would have thought is right.

Cash is generally very liquid, short-term, risk-free investments. Think T-bills.

Ahh great thanks!

But I’ve seen quite a few vignettes where “cash” provides inflation protection, so I wouldn’t think T-bills would be appropriate as “cash” in that case? Or is it that T-bills have such a short tenor they effectively reset for inflation when you roll them over?

Btw - really like your mocks and extremely short ethics summary :wink:

If you invest in, say, 3-month T-bills, then you’re essentially invested in floating-rate bonds with quarterly resets. To the extent that the T-bill rate includes an inflation premium, you get inflation protection.

I’m glad to hear it. I try.