I think in the class sir taught us that analytical duration takes benchmark yield changes while empirical durations considers change in ytm which includes spreads as well. Please explain ?
I think in the class sir taught us that analytical duration takes benchmark yield changes while empirical durations considers change in ytm which includes spreads as well. Please explain ?
MBS is like callable bond- Long bond with short call option. So obviously you will want volatility to go down if you have written an options contract as you are having a negative vega exposure. If it is not clear as to how come a MBS is like a callable bond then then you can think like this- In callRead more
MBS is like callable bond- Long bond with short call option. So obviously you will want volatility to go down if you have written an options contract as you are having a negative vega exposure.
If it is not clear as to how come a MBS is like a callable bond then then you can think like this- In callable bond the risk is of interest rates falling, bond getting called, we will receive cash and will have to reinvest at a lower rate, similarly in MBS the collateral pool is of mortgage loans as rates fall borrowers will refinance the loan.
If a particular position has low covariance with the portfolio then it will increase active risk for eg there is a 100% equity portfolio then its benchmark will also be an equity portfolio now if you buy treasuries (which has a low covariance with the existing port.) in the portfolio then it will inRead more
If a particular position has low covariance with the portfolio then it will increase active risk for eg there is a 100% equity portfolio then its benchmark will also be an equity portfolio now if you buy treasuries (which has a low covariance with the existing port.) in the portfolio then it will increase the active risk as active risk is not an absolute measure it is a relative measure of risk so relative to benchmark treasuries will not move in the same direction or magnitude as benchmark resulting in higher tracking error or active risk. And the opposite is also true, position with higher covariance will cause lower active risk. Now the first part of your question is a bit confusing high covariance position will reduce active risk and at the same time how can it contribute more to active risk. I think here risk means portfolio variance, so obviously a security with high correlations will not contribute in risk reduction.
They have applied 11% growth to 25 million which comes to 27.75 million then they compute contribution as 18% of 27.75 that is 4.995. Now they deduct 4.995 from 27.75 which comes at 22.755, and now out of nowhere they again apply 11% growth to 22.755 so it becomes 25.25805.
They have applied 11% growth to 25 million which comes to 27.75 million then they compute contribution as 18% of 27.75 that is 4.995. Now they deduct 4.995 from 27.75 which comes at 22.755, and now out of nowhere they again apply 11% growth to 22.755 so it becomes 25.25805.
Thank you so much for replying. But i have already completed all the modules of Aswath damodaran , so i am looking for a course that can teach me how to exactly make a model on excel. In ULURN course karan sir said that we will cover valuation based models later on. So if there is any course that teRead more
Thank you so much for replying.
But i have already completed all the modules of Aswath damodaran , so i am looking for a course that can teach me how to exactly make a model on excel. In ULURN course karan sir said that we will cover valuation based models later on. So if there is any course that teaches step by step how to build a excel based dcf and reletive valuation models then please let me know. Thanks
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it's dividends, expectations get build in the market that dividends would be lower in the future aRead more
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it’s dividends, expectations get build in the market that dividends would be lower in the future as well so share price goes down. That said there may be no impect on the value, as the bad time gets over company may raise dividend again and investors will realise their mistakes and price will go up back to the previous levels. It is taught in the corporate governance theories that the objective of running a company is to maximise the value and hope for convergence between value and price.
So “dividend stability” should not be a cause of concern for the managment as reducing dividend in a bad year may not impect value significantly. But this is not how things heappen in the real world , even if a company reduces dividends only for good of the company, share price falls and that falling share price takes down the managment team with it as well. As it heappend with firms like British petroleum. And because no one wants to get fired, when it come to dividends management start to focus on price and not value. And actually that is why dividends have been sticky.
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it's dividends, expectations get build in the market that dividends would be lower in the future aRead more
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it’s dividends, expectations get build in the market that dividends would be lower in the future as well so share price goes down. That said there may be no impect on the value, as the bad time gets over company may raise dividend again and investors will realise their mistakes and price will go up back to the previous levels. It is taught in the corporate governance theories that the objective of running a company is to maximise the value and hope for convergence between value and price.
So “dividend stability” should not be a cause of concern for the managment as reducing dividend in a bad year may not impect value significantly. But this is not how things heappen in the real world , even if a company reduces dividends only for good of the company, share price falls and that falling share price takes down the managment team with it as well. As it heappend with firms like British petroleum. And because no one wants to get fired, when it come to dividends management start to focus on price and not value. And actually that is why dividends have been sticky.
In higher inflationary environment both stocks and bonds perform poorly. With bonds the logic is very clear if inflation turns out to be higher than expected yields rises and prices go down. With stocks multiple ways are there to think about inflation. In general Equity as an asset class is not consRead more
In higher inflationary environment both stocks and bonds perform poorly.
With bonds the logic is very clear if inflation turns out to be higher than expected yields rises and prices go down.
With stocks multiple ways are there to think about inflation. In general Equity as an asset class is not considered to be a good inflation hedge but some parts of the equity market can provide good returns even in high inflationary environment these are companies with high pricing power that can pass on rise in input costs to customers by raising product prices.
Also you can think in this way that value of any asset (including equity) depends on two factors Cashflow(numerator in dcf model) and Risk associated with those cashflows(denominator or discount rates) as inflation rises discount rates go up(as nominal risk free rates go up and infect risk premiums may also rise due to Inflation Risk Premium) but growth rate in cashflows may not go up as margins get depressed so valuation goes down.
Yes and they said that once deferral request is submitted it cannot be reversed. And "If you choose to sit in the exam.." only applies if the deferment is not processed before the exam date and they cannot give any guarantee that it won't be processed before the exam.
Yes and they said that once deferral request is submitted it cannot be reversed. And “If you choose to sit in the exam..” only applies if the deferment is not processed before the exam date and they cannot give any guarantee that it won’t be processed before the exam.
Analytical vs Empirical duration
I think in the class sir taught us that analytical duration takes benchmark yield changes while empirical durations considers change in ytm which includes spreads as well. Please explain ?
I think in the class sir taught us that analytical duration takes benchmark yield changes while empirical durations considers change in ytm which includes spreads as well. Please explain ?
See lessStructuted finance products
MBS is like callable bond- Long bond with short call option. So obviously you will want volatility to go down if you have written an options contract as you are having a negative vega exposure. If it is not clear as to how come a MBS is like a callable bond then then you can think like this- In callRead more
MBS is like callable bond- Long bond with short call option. So obviously you will want volatility to go down if you have written an options contract as you are having a negative vega exposure.
If it is not clear as to how come a MBS is like a callable bond then then you can think like this- In callable bond the risk is of interest rates falling, bond getting called, we will receive cash and will have to reinvest at a lower rate, similarly in MBS the collateral pool is of mortgage loans as rates fall borrowers will refinance the loan.
See lessActive equity portfolio construction
If a particular position has low covariance with the portfolio then it will increase active risk for eg there is a 100% equity portfolio then its benchmark will also be an equity portfolio now if you buy treasuries (which has a low covariance with the existing port.) in the portfolio then it will inRead more
If a particular position has low covariance with the portfolio then it will increase active risk for eg there is a 100% equity portfolio then its benchmark will also be an equity portfolio now if you buy treasuries (which has a low covariance with the existing port.) in the portfolio then it will increase the active risk as active risk is not an absolute measure it is a relative measure of risk so relative to benchmark treasuries will not move in the same direction or magnitude as benchmark resulting in higher tracking error or active risk. And the opposite is also true, position with higher covariance will cause lower active risk. Now the first part of your question is a bit confusing high covariance position will reduce active risk and at the same time how can it contribute more to active risk. I think here risk means portfolio variance, so obviously a security with high correlations will not contribute in risk reduction.
See lessNAV calculation
They have applied 11% growth to 25 million which comes to 27.75 million then they compute contribution as 18% of 27.75 that is 4.995. Now they deduct 4.995 from 27.75 which comes at 22.755, and now out of nowhere they again apply 11% growth to 22.755 so it becomes 25.25805.
They have applied 11% growth to 25 million which comes to 27.75 million then they compute contribution as 18% of 27.75 that is 4.995. Now they deduct 4.995 from 27.75 which comes at 22.755, and now out of nowhere they again apply 11% growth to 22.755 so it becomes 25.25805.
See lessNAV calculation
no it is 25.25805 million.
no it is 25.25805 million.
See lessFinancial Modelling
Thank you so much for replying. But i have already completed all the modules of Aswath damodaran , so i am looking for a course that can teach me how to exactly make a model on excel. In ULURN course karan sir said that we will cover valuation based models later on. So if there is any course that teRead more
Thank you so much for replying.
See lessBut i have already completed all the modules of Aswath damodaran , so i am looking for a course that can teach me how to exactly make a model on excel. In ULURN course karan sir said that we will cover valuation based models later on. So if there is any course that teaches step by step how to build a excel based dcf and reletive valuation models then please let me know. Thanks
L2 Equity Valuation Query | Context: Connecting Dividend Policy to Earnings Mgt FRA
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it's dividends, expectations get build in the market that dividends would be lower in the future aRead more
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it’s dividends, expectations get build in the market that dividends would be lower in the future as well so share price goes down. That said there may be no impect on the value, as the bad time gets over company may raise dividend again and investors will realise their mistakes and price will go up back to the previous levels. It is taught in the corporate governance theories that the objective of running a company is to maximise the value and hope for convergence between value and price.
So “dividend stability” should not be a cause of concern for the managment as reducing dividend in a bad year may not impect value significantly. But this is not how things heappen in the real world , even if a company reduces dividends only for good of the company, share price falls and that falling share price takes down the managment team with it as well. As it heappend with firms like British petroleum. And because no one wants to get fired, when it come to dividends management start to focus on price and not value. And actually that is why dividends have been sticky.
See lessL2 Equity Valuation Query | Context: Connecting Dividend Policy to Earnings Mgt FRA
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it's dividends, expectations get build in the market that dividends would be lower in the future aRead more
Historically, dividends have always been very sticky. Even in the worst of times companies have not reduced their dividends , because it is viewed as a negative sign by investors. If a company reduces it’s dividends, expectations get build in the market that dividends would be lower in the future as well so share price goes down. That said there may be no impect on the value, as the bad time gets over company may raise dividend again and investors will realise their mistakes and price will go up back to the previous levels. It is taught in the corporate governance theories that the objective of running a company is to maximise the value and hope for convergence between value and price.
So “dividend stability” should not be a cause of concern for the managment as reducing dividend in a bad year may not impect value significantly. But this is not how things heappen in the real world , even if a company reduces dividends only for good of the company, share price falls and that falling share price takes down the managment team with it as well. As it heappend with firms like British petroleum. And because no one wants to get fired, when it come to dividends management start to focus on price and not value. And actually that is why dividends have been sticky.
See lessGeneral (inflation impact)
In higher inflationary environment both stocks and bonds perform poorly. With bonds the logic is very clear if inflation turns out to be higher than expected yields rises and prices go down. With stocks multiple ways are there to think about inflation. In general Equity as an asset class is not consRead more
In higher inflationary environment both stocks and bonds perform poorly.
With bonds the logic is very clear if inflation turns out to be higher than expected yields rises and prices go down.
With stocks multiple ways are there to think about inflation. In general Equity as an asset class is not considered to be a good inflation hedge but some parts of the equity market can provide good returns even in high inflationary environment these are companies with high pricing power that can pass on rise in input costs to customers by raising product prices.
Also you can think in this way that value of any asset (including equity) depends on two factors Cashflow(numerator in dcf model) and Risk associated with those cashflows(denominator or discount rates) as inflation rises discount rates go up(as nominal risk free rates go up and infect risk premiums may also rise due to Inflation Risk Premium) but growth rate in cashflows may not go up as margins get depressed so valuation goes down.
See lessCFA Exam Defferal
Yes and they said that once deferral request is submitted it cannot be reversed. And "If you choose to sit in the exam.." only applies if the deferment is not processed before the exam date and they cannot give any guarantee that it won't be processed before the exam.
Yes and they said that once deferral request is submitted it cannot be reversed. And “If you choose to sit in the exam..” only applies if the deferment is not processed before the exam date and they cannot give any guarantee that it won’t be processed before the exam.
See less