The lower the correlation, the narrower the optimal corridor. When asset classes move in opposite directions, further divergence from target weights is more likely. So tighter width for rebalancing.
The lower the correlation, the narrower the optimal corridor. When asset classes move in opposite directions, further divergence from target weights is more likely. So tighter width for rebalancing.
Duration Times Spread (DTS) is the market standard method for measuring the credit volatility of a corporate bond. It is calculated by simply multiplying two readily available bond characteristics: the effective spread durations and the credit spread. The result is a single number that can be used tRead more
Duration Times Spread (DTS) is the market standard method for measuring the credit volatility of a corporate bond. It is calculated by simply multiplying two readily available bond characteristics: the effective spread durations and the credit spread. The result is a single number that can be used to compare credit risk across a wide range of bonds. A portfolio’s DTS is the market value-weighted average of the DTS of its individual bonds and spread changes of a portfolio are measured on a percentage (ΔSpread/Spread) basis rather than in absolute basis point terms.
Every futures contract has an underlying asset, the quantity of the asset, delivery location, and delivery date. For example, if the underlying asset is light sweet crude oil, the quantity is 1,000 barrels, the delivery location is the Henry Hub in Erath, Louisiana and the delivery date is DecemberRead more
Every futures contract has an underlying asset, the quantity of the asset, delivery location, and delivery date.
For example, if the underlying asset is light sweet crude oil, the quantity is 1,000 barrels, the delivery location is the Henry Hub in Erath, Louisiana and the delivery date is December 2017.
When a party enters into a futures contract, they are agreeing to exchange an asset, or underlying, at a defined time in the future. This asset can be a physical commodity like crude oil, or a financial product like a foreign currency.
When the asset is a physical commodity, to ensure quality, the exchange stipulates the acceptable grades of the commodity.
For example, WTI Crude Oil contracts at CME Group is for 1,000 barrels of a grade of crude oil known as “light, sweet” which refers to the amount of hydrogen sulfide and carbon dioxide the crude oil contains.
Futures contracts for financial products are understandably more straightforward: the U.S. dollar value of 100,000 Australian dollars is the U.S. dollar value of 100,000 Australian dollars.
Each futures contract specifies is the quantity of the product delivered for a single contract, also known as contract size. For example: 5,000 bushels of corn, 1,000 barrels of crude oil or Treasury bonds with a face value of $100,000 are all contract sizes as defined in the futures contract specification.
The exchange defines the contract size to meet the needs of market participants. For example, participants who wish to take a speculative or hedging position in the S&P 500 futures contract but cannot risk the exposure of that size contract ($250 x the S&P 500) can instead use the E-mini S&P 500 futures contract to gain that exposure ($50 x the S&P 500 Index).
A futures contract also specifies where the asset will be delivered upon execution. Delivery is an important consideration for certain physical commodity markets entailing significant transportation costs
to order the exact quantity that will be sold, and receipt goods into stock when they are needed. Based on the just-in-time inventory approach of short lead times, zero inventory is more effective, flexible and less expensive than holding and storing large amounts of inventory. Stock is effectivelyRead more
to order the exact quantity that will be sold, and receipt goods into stock when they are needed.
Based on the just-in-time inventory approach of short lead times, zero inventory is more effective, flexible and less expensive than holding and storing large amounts of inventory. Stock is effectively pushed back up the supply chain by the retailer who wants to avoid the risks and cost of holding inventory.
The zero-inventory approach is not feasible for all enterprises but is perfectly suited to many businesses in today’s technological environment. Most internet-based retailers operate using the zero-inventory model, particularly for high variety, perishable and fashion-based consumer lines. Allowing companies to maximise cashflow by raising the speed and rate of inventory turns.
Ultimately, a zero-inventory strategy relies on having an efficient supply chain that is completely reliable.
Because of decreasing absolute risk aversion with wealth and because their fundamental consumption needs are met, wealthy investors will demand a lower premium than poorer investors for holding risky assets, all else being equal.
Because of decreasing absolute risk aversion with wealth and because their fundamental
consumption needs are met, wealthy investors will demand a lower premium
than poorer investors for holding risky assets, all else being equal.
Two kinds of tax-based evaluations must be made for all ETFs: First, the investor must consider the likelihood of an ETF distributing capital gains to shareholders. Second, the investor must consider what happens when the investor sells the ETF. These two actions are distinct; the tax efficiency ofRead more
Two kinds of tax-based evaluations must be made for all ETFs: First, the investor must consider the likelihood of an ETF distributing capital gains to shareholders. Second, the investor must consider what happens when the investor sells the ETF. These two actions are distinct; the tax efficiency of a fund regarding its capital gains distributions has no relation to its tax efficiency at the time of investor sale.
Capital Gains Distributions
The issue of capital gains distributions affects all investors in taxable accounts. In general, funds must distribute any capital gains realized during the year. Funds typically make these distributions at year-end, although they may make them quarterly or on another periodic schedule. ETFs are said to be “tax fair” and “tax efficient” because they have certain advantages over traditional mutual funds regarding capital gains distributions. On average, they distribute less in capital gains than competing mutual funds for two primary reasons. Tax fairness. In a traditional mutual fund, when an investor sells, the fund must (with a few exceptions) sell portfolio securities to raise cash to pay the investor. Any securities sold at a profit incur a capital gains charge, which is distributed to remainingshareholders. Put another way, in a traditional mutual fund, shareholders may have to pay tax liabilities triggered by other shareholders redeeming out of the fund.
In contrast, an investor sells ETF shares to another investor in the secondary mar-ket. The ETF manager typically does not know that the sale is occurring and does not need to alter the portfolio to accommodate this transaction. Thus, the selling activities of individual investors in the secondary market do not require the fund to trade out of its underlying positions. If an AP redeems ETF shares, this redemption occurs in kind. In markets where redemptions in kind are allowed, this is not a taxable event. Thus, redemptions do not trigger capital gain realizations. This aspect is why ETFs are considered “tax fair”: The actions of investors selling shares of the fund do not influence the tax liabilities for remaining fund shareholders.
Tax efficiency.
The redemption process allows portfolio managers to manage the fund’s tax liability. When an authorized participant submits shares of an ETF for redemption, the ETF manager can choose which underlying share lots to deliver in the redemption basket. By choosing shares with the largest unrealized capital gains—that is, those acquired at the lowest cost basis—ETF managers can use the in-kind redemption process to reduce potential capital gains in the fund. Tax lot management allows portfolio managers to limit the unrealized gains in a portfolio.
Other Distributions
Other events, such as security dividend distributions, can trigger tax liabilities forinvestors but the treatment varies by region, so investors must ensure they understand the tax treatment specific to each fund’s domicile, legal structure, and portfolio type.
Taxes on Sale
In most jurisdictions, ETFs are taxed according to their underlying holdings. For example, in the United States, an ETF holding equities or bonds will itself be subjectto the same capital gain, dividend, and return-of-capital tax rules that apply to its underlying stock or bond holdings. There can be nuances in individual tax jurisdictions, however, that require investor analysis. For example, in the United States, exchange- traded notes tracking commodity indexes are treated differently from exchange-traded funds holding commodity futures contracts, creating a preferential tax treatment. A thorough analysis of ETF efficiency should take into account the ETF structure, the local market’s taxation regime, and the individual tax situation of the end investor.
Excerpt from CFA Institute Study Material
– In short, ETFs generally do in kind creation and redemption so there is tax efficieny and tax fairness.
OPTION A Fromm anticipates that inexpensive, small imported petrol-fueled motorcycles may become substitutes for Omikroon’s petrol scooters. The important research costs in 2020 and 2021 will lead to more efficient electric scooters. Research costs will not be shown under COGS and hence it will notRead more
OPTION A
Fromm anticipates that inexpensive, small imported petrol-fueled motorcycles may become substitutes for Omikroon’s petrol scooters. The important research costs in 2020 and 2021 will lead to more efficient electric scooters. Research costs will not be shown under COGS and hence it will not affect gross profit margin.
Excess spread computation in case of an instantaneous change in spreads
Only the Change in spread * Spread duration to be taken
Only the Change in spread * Spread duration to be taken
See lessWidth of corridor for rebalanceing.
The lower the correlation, the narrower the optimal corridor. When asset classes move in opposite directions, further divergence from target weights is more likely. So tighter width for rebalancing.
The lower the correlation, the narrower the optimal corridor. When asset classes move in opposite directions, further divergence from target weights is more likely. So tighter width for rebalancing.
See lessethics code and standard
A firm can voluntarily adapt codes and ethics
A firm can voluntarily adapt codes and ethics
See lessDuration times spread DTS
Duration Times Spread (DTS) is the market standard method for measuring the credit volatility of a corporate bond. It is calculated by simply multiplying two readily available bond characteristics: the effective spread durations and the credit spread. The result is a single number that can be used tRead more
Duration Times Spread (DTS) is the market standard method for measuring the credit volatility of a corporate bond. It is calculated by simply multiplying two readily available bond characteristics: the effective spread durations and the credit spread. The result is a single number that can be used to compare credit risk across a wide range of bonds. A portfolio’s DTS is the market value-weighted average of the DTS of its individual bonds and spread changes of a portfolio are measured on a percentage (ΔSpread/Spread) basis rather than in absolute basis point terms.
See lessAlternative Investments (CFA Level II)
https://forum.sseiqforum.com/question/query-on-below-ques-copied-from-book
Alternative investment commodity
Every futures contract has an underlying asset, the quantity of the asset, delivery location, and delivery date. For example, if the underlying asset is light sweet crude oil, the quantity is 1,000 barrels, the delivery location is the Henry Hub in Erath, Louisiana and the delivery date is DecemberRead more
Every futures contract has an underlying asset, the quantity of the asset, delivery location, and delivery date.
For example, if the underlying asset is light sweet crude oil, the quantity is 1,000 barrels, the delivery location is the Henry Hub in Erath, Louisiana and the delivery date is December 2017.
When a party enters into a futures contract, they are agreeing to exchange an asset, or underlying, at a defined time in the future. This asset can be a physical commodity like crude oil, or a financial product like a foreign currency.
When the asset is a physical commodity, to ensure quality, the exchange stipulates the acceptable grades of the commodity.
For example, WTI Crude Oil contracts at CME Group is for 1,000 barrels of a grade of crude oil known as “light, sweet” which refers to the amount of hydrogen sulfide and carbon dioxide the crude oil contains.
Futures contracts for financial products are understandably more straightforward: the U.S. dollar value of 100,000 Australian dollars is the U.S. dollar value of 100,000 Australian dollars.
Each futures contract specifies is the quantity of the product delivered for a single contract, also known as contract size. For example: 5,000 bushels of corn, 1,000 barrels of crude oil or Treasury bonds with a face value of $100,000 are all contract sizes as defined in the futures contract specification.
The exchange defines the contract size to meet the needs of market participants. For example, participants who wish to take a speculative or hedging position in the S&P 500 futures contract but cannot risk the exposure of that size contract ($250 x the S&P 500) can instead use the E-mini S&P 500 futures contract to gain that exposure ($50 x the S&P 500 Index).
A futures contract also specifies where the asset will be delivered upon execution. Delivery is an important consideration for certain physical commodity markets entailing significant transportation costs
See lessFCF Valuation
to order the exact quantity that will be sold, and receipt goods into stock when they are needed. Based on the just-in-time inventory approach of short lead times, zero inventory is more effective, flexible and less expensive than holding and storing large amounts of inventory. Stock is effectivelyRead more
to order the exact quantity that will be sold, and receipt goods into stock when they are needed.
Based on the just-in-time inventory approach of short lead times, zero inventory is more effective, flexible and less expensive than holding and storing large amounts of inventory. Stock is effectively pushed back up the supply chain by the retailer who wants to avoid the risks and cost of holding inventory.
The zero-inventory approach is not feasible for all enterprises but is perfectly suited to many businesses in today’s technological environment. Most internet-based retailers operate using the zero-inventory model, particularly for high variety, perishable and fashion-based consumer lines. Allowing companies to maximise cashflow by raising the speed and rate of inventory turns.
Ultimately, a zero-inventory strategy relies on having an efficient supply chain that is completely reliable.
See lessEconomics and Investment Markets
Because of decreasing absolute risk aversion with wealth and because their fundamental consumption needs are met, wealthy investors will demand a lower premium than poorer investors for holding risky assets, all else being equal.
Because of decreasing absolute risk aversion with wealth and because their fundamental
consumption needs are met, wealthy investors will demand a lower premium
than poorer investors for holding risky assets, all else being equal.
See lessEtf – Taxation related
Two kinds of tax-based evaluations must be made for all ETFs: First, the investor must consider the likelihood of an ETF distributing capital gains to shareholders. Second, the investor must consider what happens when the investor sells the ETF. These two actions are distinct; the tax efficiency ofRead more
Two kinds of tax-based evaluations must be made for all ETFs: First, the investor must consider the likelihood of an ETF distributing capital gains to shareholders. Second, the investor must consider what happens when the investor sells the ETF. These two actions are distinct; the tax efficiency of a fund regarding its capital gains distributions has no relation to its tax efficiency at the time of investor sale.
Capital Gains Distributions
The issue of capital gains distributions affects all investors in taxable accounts. In general, funds must distribute any capital gains realized during the year. Funds typically make these distributions at year-end, although they may make them quarterly or on another periodic schedule. ETFs are said to be “tax fair” and “tax efficient” because they have certain advantages over traditional mutual funds regarding capital gains distributions. On average, they distribute less in capital gains than competing mutual funds for two primary reasons. Tax fairness. In a traditional mutual fund, when an investor sells, the fund must (with a few exceptions) sell portfolio securities to raise cash to pay the investor. Any securities sold at a profit incur a capital gains charge, which is distributed to remainingshareholders. Put another way, in a traditional mutual fund, shareholders may have to pay tax liabilities triggered by other shareholders redeeming out of the fund.
In contrast, an investor sells ETF shares to another investor in the secondary mar-ket. The ETF manager typically does not know that the sale is occurring and does not need to alter the portfolio to accommodate this transaction. Thus, the selling activities of individual investors in the secondary market do not require the fund to trade out of its underlying positions. If an AP redeems ETF shares, this redemption occurs in kind. In markets where redemptions in kind are allowed, this is not a taxable event. Thus, redemptions do not trigger capital gain realizations. This aspect is why ETFs are considered “tax fair”: The actions of investors selling shares of the fund do not influence the tax liabilities for remaining fund shareholders.
Tax efficiency.
The redemption process allows portfolio managers to manage the fund’s tax liability. When an authorized participant submits shares of an ETF for redemption, the ETF manager can choose which underlying share lots to deliver in the redemption basket. By choosing shares with the largest unrealized capital gains—that is, those acquired at the lowest cost basis—ETF managers can use the in-kind redemption process to reduce potential capital gains in the fund. Tax lot management allows portfolio managers to limit the unrealized gains in a portfolio.
Other Distributions
Other events, such as security dividend distributions, can trigger tax liabilities forinvestors but the treatment varies by region, so investors must ensure they understand the tax treatment specific to each fund’s domicile, legal structure, and portfolio type.
Taxes on Sale
In most jurisdictions, ETFs are taxed according to their underlying holdings. For example, in the United States, an ETF holding equities or bonds will itself be subjectto the same capital gain, dividend, and return-of-capital tax rules that apply to its underlying stock or bond holdings. There can be nuances in individual tax jurisdictions, however, that require investor analysis. For example, in the United States, exchange- traded notes tracking commodity indexes are treated differently from exchange-traded funds holding commodity futures contracts, creating a preferential tax treatment. A thorough analysis of ETF efficiency should take into account the ETF structure, the local market’s taxation regime, and the individual tax situation of the end investor.
Excerpt from CFA Institute Study Material
– In short, ETFs generally do in kind creation and redemption so there is tax efficieny and tax fairness.
Industry & Co analysis
OPTION A Fromm anticipates that inexpensive, small imported petrol-fueled motorcycles may become substitutes for Omikroon’s petrol scooters. The important research costs in 2020 and 2021 will lead to more efficient electric scooters. Research costs will not be shown under COGS and hence it will notRead more
OPTION A
Fromm anticipates that inexpensive, small imported petrol-fueled motorcycles may become substitutes for Omikroon’s petrol scooters. The important research costs in 2020 and 2021 will lead to more efficient electric scooters. Research costs will not be shown under COGS and hence it will not affect gross profit margin.
See less