NO. I am sorry, but I am not able to understand the buffering in the CONTEXT of this question. I do acknowledge the concept explained by you, but how come it is applicable in this case study. My question is how they have related the number of holdings in the index to the concept of buffering? As farRead more
NO.
I am sorry, but I am not able to understand the buffering in the CONTEXT of this question. I do acknowledge the concept explained by you, but how come it is applicable in this case study.
My question is how they have related the number of holdings in the index to the concept of buffering?
As far as I understand the concept of buffering is APPLIED to the index. Say NIFTY has a buffer of 200 crores on market capitalization matric before migrating a stock from mid-cap index to large-cap index.
You mentioned that “This might result in an increase in the holdings for the fund where it continues to hold the stock which has now dropped out of the mid-cap index it is following”.
But, I believe the bone of contention is the inter-index migration of a stock and not what is done in an index fund.
Can you try once again and help me to bridge the gap in my understanding.
But permanent Life insurances do have cash value. further in the core reading it’s clearly mentioned that Cash value of the insurance is a part of Financial capital and Financial capital is in turn included in the economic balance sheet . ohk ! I see , it’s written in the question that 100000 is thRead more
But permanent Life insurances do have cash value. further in the core reading it’s clearly mentioned that Cash value of the insurance is a part of Financial capital and Financial capital is in turn included in the economic balance sheet .
ohk ! I see , it’s written in the question that 100000 is the death benefit . But in table they simply mentioned 100000.
I got confused, 100000 is a death benefit not cash value – so should not be included in the Financial capital .
I think the core means to say that if the central bank doesn't cut the interest rates then the market forces may force the interest rates to go down. PS: Perhaps this phenomenon was observed in the fed funds futures contracts- in the month of May 2020-which priced in the negative interest rates; altRead more
I think the core means to say that if the central bank doesn’t cut the interest rates then the market forces may force the interest rates to go down.
PS: Perhaps this phenomenon was observed in the fed funds futures contracts- in the month of May 2020-which priced in the negative interest rates; although the FED was reluctant to push the interest rates in negative territory to support the economy from COVID shock.
I am so sorry, but I am not able to understand the answer. Trust me I read your answer thrice. Query Firstly, why the core is using -0.03 instead of 0.32 as "B" for calculating the Micro-Level Allocation effect of the Value Portfolio Manager(Small-cap value equities). Secondly, using the weights asRead more
I am so sorry, but I am not able to understand the answer. Trust me I read your answer thrice.
Query
Firstly, why the core is using -0.03 instead of 0.32 as “B” for calculating the Micro-Level Allocation effect of the Value Portfolio Manager(Small-cap value equities).
Secondly, using the weights as 20% and 25% challenges the very basis of the micro-level attribution because these weights are proportions derived from MARCO level 100% (refer: Row 1 column 3).
Moreover, you will acknowledge that the benchmark for the Value Portfolio manager should capture value bets only, but using 20% and 25 % -which are the proportions of 100%( refer: Row 1 column 3) of the table- will capture both value and growth style.
In rising yield environment,the price of the straight bond with make whole call provision will fall drastically without any support as the issuer of such bond has the right to redeem the bond at such low prices and market yields In case of puttable bond - the stong positive convexity-due to option eRead more
In rising yield environment,the price of the straight bond with make whole call provision will fall drastically without any support as the issuer of such bond has the right to redeem the bond at such low prices and market yields
In case of puttable bond – the stong positive convexity-due to option enjoyed by investors- stops the bond price to sink below the puttable price – assume par for simplicity.
Dear Mate, Thank you for the question. Here, the US firm -Nexran has contracted to sell equipment to a European customer, so the US firm has Euro Receivable. Six-month back Nexsan had sold Euro Forward and later squared off its position. I am afraid that Question 4 is from the point of view of the URead more
Dear Mate,
Thank you for the question.
Here, the US firm -Nexran has contracted to sell equipment to a European customer, so the US firm has Euro Receivable. Six-month back Nexsan had sold Euro Forward and later squared off its position.
I am afraid that Question 4 is from the point of view of the US firm- Nexran and not from the point of view of the European customer.
You are correct up-to-the point:- "C+ on the market value of the bond is equivalent to doing P+ on benchmark rates (because if rates fall, the corporation will gain by calling the bond). Now to effectively cancel it, we do P- on benchmark rates." This does not fit:- "so, we will not like bencRead more
You are correct up-to-the point:-
“C+ on the market value of the bond is equivalent to doing P+ on benchmark rates (because if rates fall, the corporation will gain by calling the bond).
Now to effectively cancel it, we do P- on benchmark rates.”
This does not fit:-
“so, we will not like benchmark yields to fall. ”
Reason: Here our objective is to nullify the C+ on bond. that’s it
Hello Mate, Thank you for posting the query. Trust me, you raised a great question. It is worthwhile to spend some time on this. Honestly, this tricky area stumped me as well, but not for too long- thanks to Sanjay Sir's CFA Level II notes. Now, I am trying to answer your query:- You correctly pointRead more
Hello Mate,
Thank you for posting the query. Trust me, you raised a great question. It is worthwhile to spend some time on this. Honestly, this tricky area stumped me as well, but not for too long- thanks to Sanjay Sir’s CFA Level II notes. Now, I am trying to answer your query:-
You correctly pointed out that the issuer of a callable bond in question has done C+; however, this C+ is on THE MARKET VALUE OF BOND. Technically, by doing C+ on the BOND MARKET VALUE, the issuer is betting on the BENCHMARK YIELDS to fall. In other words, the issuer will gain when the yields will fall as the option price embedded in the bond will rise.
2. Now, with the RECEIVER swaption, you are correct to say that when someone goes long on RECEIVER SWAPTION, he/she does P+( thanks to Sanjay Sir’s CFA LEVEL II notes again). BUT this P+ is on the underlying BENCHMARK YIELDS and not on the BOND’s MARKET VALUE. In other words, the person going LONG on RECEIVER SWAPTION will love to see the benchmark yields falling. He will enjoy, seeing the yields crashing as he will get HIGH fixed yield in exchange for a lower floating yield.
Now please observe a fine line. Try an analyse point 1 in the context of point 2.
Yes, you got it!!!!
The issuer of a callable bond will enjoy if the yield falls and per the requirement of example 8, in order to nullify this enjoyment via swaption, we need to do sell RECEIVER swaption (i.e. P- on the BENCHMARK YIELDS), as the writer of RECEIVER SWAPTION will hate to see the BENCHMARK yields falling.
Equity
NO. I am sorry, but I am not able to understand the buffering in the CONTEXT of this question. I do acknowledge the concept explained by you, but how come it is applicable in this case study. My question is how they have related the number of holdings in the index to the concept of buffering? As farRead more
NO.
I am sorry, but I am not able to understand the buffering in the CONTEXT of this question. I do acknowledge the concept explained by you, but how come it is applicable in this case study.
My question is how they have related the number of holdings in the index to the concept of buffering?
As far as I understand the concept of buffering is APPLIED to the index. Say NIFTY has a buffer of 200 crores on market capitalization matric before migrating a stock from mid-cap index to large-cap index.
You mentioned that “This might result in an increase in the holdings for the fund where it continues to hold the stock which has now dropped out of the mid-cap index it is following”.
But, I believe the bone of contention is the inter-index migration of a stock and not what is done in an index fund.
Can you try once again and help me to bridge the gap in my understanding.
See lessPrivate Wealth Management (2): Risk Management for Individuals
But permanent Life insurances do have cash value. further in the core reading it’s clearly mentioned that Cash value of the insurance is a part of Financial capital and Financial capital is in turn included in the economic balance sheet . ohk ! I see , it’s written in the question that 100000 is thRead more
But permanent Life insurances do have cash value. further in the core reading it’s clearly mentioned that Cash value of the insurance is a part of Financial capital and Financial capital is in turn included in the economic balance sheet .
ohk ! I see , it’s written in the question that 100000 is the death benefit . But in table they simply mentioned 100000.
I got confused, 100000 is a death benefit not cash value – so should not be included in the Financial capital .
I got it now .
See lessCME
I think the core means to say that if the central bank doesn't cut the interest rates then the market forces may force the interest rates to go down. PS: Perhaps this phenomenon was observed in the fed funds futures contracts- in the month of May 2020-which priced in the negative interest rates; altRead more
I think the core means to say that if the central bank doesn’t cut the interest rates then the market forces may force the interest rates to go down.
PS: Perhaps this phenomenon was observed in the fed funds futures contracts- in the month of May 2020-which priced in the negative interest rates; although the FED was reluctant to push the interest rates in negative territory to support the economy from COVID shock.
Sir, please confirm my understanding.
See lessPerformance Attribution: Macro-Micro Level – Section 3.3 of core readings
I am so sorry, but I am not able to understand the answer. Trust me I read your answer thrice. Query Firstly, why the core is using -0.03 instead of 0.32 as "B" for calculating the Micro-Level Allocation effect of the Value Portfolio Manager(Small-cap value equities). Secondly, using the weights asRead more
I am so sorry, but I am not able to understand the answer. Trust me I read your answer thrice.
Query
Firstly, why the core is using -0.03 instead of 0.32 as “B” for calculating the Micro-Level Allocation effect of the Value Portfolio Manager(Small-cap value equities).
Secondly, using the weights as 20% and 25% challenges the very basis of the micro-level attribution because these weights are proportions derived from MARCO level 100% (refer: Row 1 column 3).
See lessMoreover, you will acknowledge that the benchmark for the Value Portfolio manager should capture value bets only, but using 20% and 25 % -which are the proportions of 100%( refer: Row 1 column 3) of the table- will capture both value and growth style.
Make whole call provision
In rising yield environment,the price of the straight bond with make whole call provision will fall drastically without any support as the issuer of such bond has the right to redeem the bond at such low prices and market yields In case of puttable bond - the stong positive convexity-due to option eRead more
So, puttable bonds perform well.
See lessPerformance attribution: Yeild curve decomposition -Duration based
I am attaching the exhibit . Also , I am not able to understand ".............sit on the flat part of yield curve ,........."
I am attaching the exhibit .
Also , I am not able to understand “………….sit on the flat part of yield curve ,………”
See lessCurrency exchange rate
Dear Mate, Thank you for the question. Here, the US firm -Nexran has contracted to sell equipment to a European customer, so the US firm has Euro Receivable. Six-month back Nexsan had sold Euro Forward and later squared off its position. I am afraid that Question 4 is from the point of view of the URead more
Dear Mate,
Thank you for the question.
Here, the US firm -Nexran has contracted to sell equipment to a European customer, so the US firm has Euro Receivable. Six-month back Nexsan had sold Euro Forward and later squared off its position.
I am afraid that Question 4 is from the point of view of the US firm- Nexran and not from the point of view of the European customer.
Hope this helps.
Thanks.
See lessRISKS IN LIABILITY-DRIVEN INVESTING
You are correct up-to-the point:- "C+ on the market value of the bond is equivalent to doing P+ on benchmark rates (because if rates fall, the corporation will gain by calling the bond). Now to effectively cancel it, we do P- on benchmark rates." This does not fit:- "so, we will not like bencRead more
You are correct up-to-the point:-
“C+ on the market value of the bond is equivalent to doing P+ on benchmark rates (because if rates fall, the corporation will gain by calling the bond).
Now to effectively cancel it, we do P- on benchmark rates.”
This does not fit:-
“so, we will not like benchmark yields to fall. ”
Reason: Here our objective is to nullify the C+ on bond. that’s it
RISKS IN LIABILITY-DRIVEN INVESTING
Hello Mate, Thank you for posting the query. Trust me, you raised a great question. It is worthwhile to spend some time on this. Honestly, this tricky area stumped me as well, but not for too long- thanks to Sanjay Sir's CFA Level II notes. Now, I am trying to answer your query:- You correctly pointRead more
Hello Mate,
Thank you for posting the query. Trust me, you raised a great question. It is worthwhile to spend some time on this. Honestly, this tricky area stumped me as well, but not for too long- thanks to Sanjay Sir’s CFA Level II notes. Now, I am trying to answer your query:-
2. Now, with the RECEIVER swaption, you are correct to say that when someone goes long on RECEIVER SWAPTION, he/she does P+( thanks to Sanjay Sir’s CFA LEVEL II notes again). BUT this P+ is on the underlying BENCHMARK YIELDS and not on the BOND’s MARKET VALUE. In other words, the person going LONG on RECEIVER SWAPTION will love to see the benchmark yields falling. He will enjoy, seeing the yields crashing as he will get HIGH fixed yield in exchange for a lower floating yield.
Now please observe a fine line. Try an analyse point 1 in the context of point 2.
Yes, you got it!!!!
The issuer of a callable bond will enjoy if the yield falls and per the requirement of example 8, in order to nullify this enjoyment via swaption, we need to do sell RECEIVER swaption (i.e. P- on the BENCHMARK YIELDS), as the writer of RECEIVER SWAPTION will hate to see the BENCHMARK yields falling.
See less