When do you use TWAP over VWAP?

CFA Level III
#21

The way i remember it :

[1]The stipulation of a cushion -> eliminates Constant mix from consideration.we are left with B&H and CPPI

[2]CPPI underperforms in fluctuating markets while B&H is NEUTRAL.Hence B&H is better than CPPI.

[3] If there was NO CUSHION,then contant mix would have been the best,B&H the second best and third is CPPI.

#22

cushion just means BH or CPPI. volatile market will chew up the client returns even in a market that is trending higher LT.

#23

You see, i shall agree with you provided the client had stated the cushion as 170k in CASH. Howevere, no such statement been provided, in my humble opinion. So, the outcome is open to ambiguity.

#24

you’re right. the client would rather have 170k cushion in potato chips or photos of kim kardashian.

#25

aw man…once and for all what is the right anwer ? my brain is too puny!

#26

Listen, “cushion” means the excess funds ABOVE the desired floor. The Floor is what in our case? I had a look in the SchweserNotes about rebalancing - it says “CPPI outperforms other strategies in a TRENDING market”.

#27

And B&H is said to …“Outperfoms a constant mix strategy in trending market; outperforms CPPI in FLAT but OSCILLATING market.” What you think?

#28

+1

#29

i think i am screwed.

#30

Just a minute … did the question say that xyz wants to mainatin the vlaue of the investment above floor value?

if yest CPPI is better because it gives protection

right?

#31

i dont remember the question…just riffing on what is available in this thread…lol

#32

Volatile + Cushion = Buy and Hold

Trending + Cushion = CPPI

Volatile : Cst Mix > Buy and Hold > CPPI

Trending: CPPI > Buy and Hold > Cst Mix

But i dont remember mentioning anything regarding VOLATILE markets because i DID search for this term and i couldnt find it at all.

#33

So what did you select Bilal in your form

#34

it was tricky because it said something like the client agrees with the forecast of the portfolio manager kadar. and that guy said he expects volatile outlook.

#35

so…is it buy and hold or CPPI? haha…

#36

I dod

#37

I wanna hope this statement is true. However, i remember the market was volatile and trending. That is why a clue is in the client risk tolerance, i think.

#38

Seems like .

#39

Exactly. Oscillating is different then volatile but trending upwards. CPPI would be the best choice.

#40

And, how you feel now, after that? Another point of yours - hope, it is +