CFA1级公式表.jpg - Computing Index Prices Critical relationship between and g full price = PV at last coupon date x(1 YTM UT Forward Contract Value

CFA1级公式表.jpg - Computing Index Prices Critical...

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Unformatted text preview: Computing Index Prices Critical relationship between &, and g full price = PV at last coupon date x (1 + YTM) UT Forward Contract Value At time : Each security in the put-call parity relationship can stock falls. accrued interest = coupon payment x (t/T) Modified duration is the approximate change in a be expressed as: bond's price given a 1% change in its YTM: C = S+ p - T LEVEL I SCHWESER'S QuickSheet adjusted divisor = days from most recent coupon payment to ( 1 + Rf ) T - (1+ RF)T P Value-weighted Index . Small changes in difference between k, and g ( 1 + Rf ) 2Vo ( Ay ) At expiration (time t = 1): CRITICAL CONCEPTS FOR THE 2017 CFA EXAM L(current prices)(# shares) Matrix pricing: For illiquid bonds, use yields of bonds payoff to long = S, - F.(T) X [(base year prices)(# base year shares)" nt growth rate Effective duration is required if a bond has Futures vs. Forwards (1 + RF) T T = S+ p - c (1 + RF) T estimate yield; adjust for ETHICAL AND PROFESSIONAL Approximation formula for nominal required rate: STANDARDS E(R) = RFR + IP + RP Expected return, variance of 2-stock portfolio: Put-Call-Forward Parity E(RP) = WAE(RA ) + WBE(RB) Types of Orders maturity differences with linear interpolation. embedded options: Execution instructions: how to trade; e.g., market Earnings Multiplier Model (V_) -(V+) Exchange-traded 2Vo (curve) Unique contracts Standardized contracts The present value of the forward price of the underlying asset, F,(T) / (1 + Rf), can be Means Guaranteed by clearinghouse substituted for S, in any of the put-call parity Knowledge of the Law. sample/population, divided by # of observations. var (RP) = WAG?(RA) + who?(RB) Validity instructions: when to execute; e.g., stop PQ = /En _ payout ratio Default risk Price change estimates based on duration only are Little or no regulation Regulated relationships at time 0. Independence and Objectivity. Misrepresentation Geometric mean: used when calculating investment +2WAWBO(RA)O(RB)P(RA.RB) . Domestic bonds. Domestic issuer and currency. Clearing instructions: how to clear and settle; for sell improved by adjusting for convexity: Forward Rate Agreements (FRA) ns over multiple periods or to measure Normal Distributions Integrity of Capital Markets Normal distribution is completely described by its Market Structures Price Multiples lend money at a certain rate at some future date. ALTERNATIVE INVESTMENTS I(A) Material Nonpublic In leading P/E = II(B) Market Manipulation. mean and variance. Interest Rate Swaps Duties to Clients RC= (1+R, )x...x(1+RN)|"-1 68% of observations fall within + lo. Order-driven markets: buyers and sellers matched forecast EPS next 12 mo. Asset-Backed Securities price per share Residential MBS: home mortgages are collateral. May be replicated by a series of off-market FRAS Event-driven strategies: merger arbitrage; distressed/ Loyalty, Prudence, and Care. Suitability. harmonic mean = trailing P/E = EPS previous 12 mo. Bond Issuance Forms of EMH Underwritten offering: Investment banks buy entire loans and need credit enhancement. book value per share . Buyer of a call option-long asset exposure. III(E) Preservation of Confidentiality. Prepayment risk: contraction risk from faster asset-backed fixed income; general fixed income; Variance and Standard Deviation Z-score: "standardizes" observation from normal . Writer (seller) of a call option-short asset Variance: average of squared deviations from mean. distribution; represents # of standard deviations a Shelf registration: Register entire issue with volatility; multi-strategy. Equity strategies: market neutral; fundamental ional Compensation Arrangements. given observation is from population mean. P/S = price per share regulators but sell over a period of time. CMOs: pass-through MBS are collateral. May have observation - population mean _x- Investment Analysis, Recommendations, price per share exposure. Macro strategies: based on global economic trends. population variance = 02 = i- V(A) Diligence and Reasonable Basis. Binomial Models cash flow per share intrinsic value of a put option = Max[0, X - S] V(B) Communication with Clients and Convertible: Bondholder may exchange bond for Credit card ABS: credit card receivables are a stock, movements (up/down). A binomial model FIXED INCOME Conflicts of Interest can describe changes in the value of an asset or Assumes perfect markets in which all information Hard hurdle rate: incentive fee only on return Retention. is cost free and available to everyone at the same CDOs: Bonds, bank loans, MBS, ABS, or other above hurdle rate. time. Even with inside info, investor cannot Basic Features of Bonds CDOs are collateral. Standard deviation: square root of variance. Issuer. Sovereign, non-sovereign, quasi-government, but only paid if return is greater than hurdle rate. VI(C) Referral Fees. Holding Period Return (HPR) supranational, corporate, SPE. Effective yield depends on periodicity. YTM = Secured bonds are backed by specific collateral and Responsibilities as a CFA Institute Member or CFA Candidate RAPID, P, +D._ Sampling distribution: probability distribution of EQUITY INVESTMENTS Maturity. Money market (one year or less); capital effective yield for annual-pay bonds. Par value. Bond's principal value (face value). Semiannual bond basis: YTM = 2 x semiannual Unsecured bonds are general claims to issuer's cash Factors that Affect Option Values Private Equity VII(A) Conduct as P product as Participants in CFA Institute Coefficient of Variation Internal credit enhancement: Excess spread, Coefficient of variation (CV): expresses how much Pists managers), management buy-ins (new managers) Designation, and the CFA Program. Increase Global Investment Performance Standards dispersion exists relative to mean of a distribution External credit enhancement: Surety bonds, letters of Formative stage: angel investing, seed stage, early (GIPS") Central Limit Theorem Growth: rapid growth, falling prices, limited . Compliance statement: "[Insert name of firm] has Central limit theorem: when selecting simple prepared and presented this report in compliance standard deviation of a distribution by the mean or er growth, intense competition, Price, Yield, Coupon Relationships Credit Analysis expected value of the distribution: declining profitability, cost cutting, weaker firms Bond prices and yields are inversely related. Investment grade: Baa3/BBB- or above Global Investment Performance Time to Increas are: slow growth, consolidation, stable prices, ncrease* comparables; discounted cash flow; asset-based. Sharpe Ratio high barriers to entry. expiration Standard Error Decline: negative growth, declining prices, Holding costs Increas Decreas construction, disclosures, presentation and Sharpe ratio: measures excess return per unit of risk. Standard error of the sample mean is the standard future date. "ly3y" = 3-year forward rate 1 year loss severity = percent of value lost if borrower Increase reporting, real estate, private equity, and wrap Five Competitive Forces from today. defaults Includes residential property; commercial property; feel separately managed account portfolios. Example of spot-forward relationship: expected loss = default risk x loss severity real estate investment trusts (REITs); farmland/ recovery rate = 1 - expected loss percentag "Except some deep-in-the-money European puts. Bullet: All principal repaid at maturity. Yield Spreads Put-Call Parity QUANTITATIVE METHODS 5. Power of suppliers. Fully amortizing: Equal periodic payments include G-spread: Basis points above government yield. The put-call parity relationship for European I-spread: Basis points above swap rate. DERIVATIVES options at time . Time Value of Money Basics For both ratios, larger is better. One-Period Valuation Model Expected Return/Standard Deviation Confidence Intervals Partially amortizing: Periodic payments include Z-spread: Accounts for shape of yie Option-adjusted spread: Adjusts Z-spread for effects Arbitrage and Replication ( 1 + RF ) Contango: futures price > spot price. Confidence interval: gives range of values the mean Expected return: E(X) = _P(x; ) X, value will be between, with a given probability (say Interest Rate Risk ts with identical cash flows in the future, regardless of future events, V/(1 + I/Y)N. E(X) = P(x1 ) x, + P(x2 ) * 2 + ... + P(x) x, 90% or 95%). With known variance, formula for a Sinking fund: Schedule for early redemption. confidence interval is: Be sure to use expected dividend D, in calculation. as two components: reinvestment risk . Collateral yield: return on T-bills posted as margin. Floating-rate: Coupon payments based on reference Price return: due to change in spot price. Probabilistic variance : rate plus margin. and market price risk from YTM changes. These risks Supernormal growth model (multi-stage) DDM. Ordinary annuity: cash flow at end-of-time period. futures price & spot = P( x, ) [ x, - E(X ) ] + P( x2 ) [ x2 - E(X) ] Zo2 = 1.645 for 90% confidence intervals - convenience yield (YTM) to find PV. This is a bond's flat price (does Infrastructure Long-lived assets for public use, including Standard deviation: take square root of variance. transportation, utility, communications, social Correlation and Covariance Correlation: covariance divided by product of the (significance level 1%, 0.5% in each tail) Constant growth model: Full price includes accrued interest. Government duration. This is the weighted average of times until a bond's cash flows are scheduled to be paid. Greenfield: Infrastructure to be built 2. Expected inflation rate premium (IP). two standard deviations . initiation. Value may change during the contract's life with opposite gains/losses to the long and short. E(R) = (1 + RFReal)(1+IP)(1 + RP)-1 U.S. $29.00 @ 2016 Kaplan, Inc. All Rights Reserved....
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