Hi All, T-B topic in PM is just getting difficult to digest, any idea what kind of question is likely to be in the Exam ? Anyone who has given L2 In past, any thoughts ? suugestion ? -Thanks,

Frankly, I am not sure. However, if you manage to work through the first practice problem (which has 4 parts) in the CFAI text, I would say you should have a good grasp of T-B.

Hello, Anyone has any idea ? -Thanks,

Well, on the 2007 exam, the morning session had a set that was all about Treynor-Black, if I remember correctly. So your chances are pretty good that they won’t have a full set on it just two years later.

There wasn’t a single question on it on the 2008 exam. Instead, they decided to blindside everyone with questions about the stability of the minimum variance frontier, which is totally useless shit.

I heard this exam is multiple choice, so it shouldn’t be too hard, right? =)

Expect Q’s on call-put parity, commodiaties, swaps, and pricing of futures/options. I expect 3 item sets so 18 questions. Everything else is a toss in the air. But if you know the material list above pretty well i’m sure you’ll get a 50-70 on derv section.

There is no way to game PM on this level. Questions come from anywhere. Try to get a decent grasp on everything and hope for the best.

I agee with a previous poster. If I am CFAI, I would give an evenly distributed exam among all topics, so that people who don’t have good coverage would be filtered, and people who don’t cover enough depth would also get filtered. As for T-B, I would recommend people to work through the first practice problem in CFAI text. I found it pretty helpful since I discover how little I know about T-B from reading the Schweser’s notes. Be warned though: this problem has four parts, so do expect to spend some time on it. (I spent around 3 hours on it.)

Hello, How did we solve for Part D> Couldn’t Understand How did we get the formula for Part D> Anyone’s help will be appericiated. -Thanks, Nilesh

Part D is the most difficult, as it requires you to compute the final makeup of the portfolio after balancing. The idea is that we want to compute the optimal position for the portfolio, denoted by y. You can find the equation at the beginning of the SS. To compute y, you need: the investor’s coefficient of risk aversion (A), which is given in the question; the mean excess return of the optimal risky portfolio and its variance. I don’t have the CFAI text with me, but I believe the equation for the latter two are given in one of the examples in the SS. I don’t believe CFAI has explained how the equation were derived. Once you find y, the final make up of the portfolio after balancing is: Risk free assets w/ position (1-y) Passive equity portfolio w/ position (y * weight of index portfolio you computed in Part B) Risky assets i-th w/ positions (y * weight of optimal risky portfolio you computed in Part B * weight of i-th asset in the risky portfolio you computed in Part B) I don’t think (and I pray not) that CFAI requires us to know the calculation, since it is not required by the LOS. However, if you manage to follow the calculation in this practice problem, I believe you would be in a much better position than just reading through the Schweser’s notes.

I am going to hold off a little long on trying to comprehend this…it states specifically in the CFAI text that candidates are not responsible for deriving or memorizing any of the TB formulas for the test. I know CFAI is tricky, but i they put something on the test that they go out of their way to say won’t be on there then I will stand up in the middle of the test, flip the table and walk out with my middle fingers up. I think a general understanding of the steps involved will be good enough. Best, TheChad

It’s true that CFAI LOS doesn’t require candidates to memorize or calculate with the T-R model. However, if they ask you how does one parameter affect the outcome of T-R model, that implicitly would require some sort of knowledge about how the T-R equation work.

eltia Wrote: ------------------------------------------------------- > It’s true that CFAI LOS doesn’t require candidates > to memorize or calculate with the T-R model. > However, if they ask you how does one parameter > affect the outcome of T-R model, that implicitly > would require some sort of knowledge about how the > T-R equation work. I can live with that as you can apply logic to a lot of those types of questions. It is the memorization of the formulas that I would find difficult. Best, TheChad