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Asked: September 16, 20212021-09-16T02:36:30+05:30 2021-09-16T02:36:30+05:30In: Fixed Income (CFA L3)

L3 Fixed Income | 2017 AM Session Query

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Need help decoding Q 9B


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    9 Answers

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    1. QF
      QF Co-Founder QFounder
      2021-09-16T02:41:28+05:30Added an answer on September 16, 2021 at 2:41 am

      Check Sir’s audio response

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      • QF
        QF Co-Founder QFounder
        2021-09-16T02:47:58+05:30Replied to answer on September 16, 2021 at 2:47 am

        Source : 2017 AM Session paper.

        Query: I got confused as in most question in fixed income where they ask to adjust duration, they usually do it via futures or swap which have BPV in place, but for cash was not clear how to take its BPV while maintaining all bonds weights.

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        • QF
          QF Co-Founder QFounder
          2021-09-16T02:48:24+05:30Replied to answer on September 16, 2021 at 2:48 am

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    2. Piyush15
      Piyush15 Beginner
      2021-11-05T22:26:47+05:30Added an answer on November 5, 2021 at 10:26 pm

      As far as I understand, to increase the money duration of 233,000 to 244,000 we have to infuse cash into the portfolio. Since we can’t change the weights of the securities in the portfolio, the additional cash will be invested in the same proportion as the existing weights into each of the securities. Consequently, the money duration will increase because our market value would increase and each security’s weight will remain the same as before.

      I can be wrong, this is just my understanding.

      Thanks for reading..

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      • anshuljain
        anshuljain Beginner
        2021-11-17T11:09:17+05:30Replied to answer on November 17, 2021 at 11:09 am

        I also think the same.

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    3. Saharsh Jhajharia
      Saharsh Jhajharia Beginner
      2021-11-20T08:20:34+05:30Added an answer on November 20, 2021 at 8:20 am

      It simply means how much cash you require to purchase each constituents (to increase each by 3%) to rebalance the portfolio. So increasing each constituents by 3% will ensure that security weights are same. And the cash required to do so will be 3% of the market value of the securities. Note that you are not adding cash to the portfolio but using cash to buy the constituents so as to rebalance it to the initial target weights.

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    4. Saharsh Jhajharia
      Saharsh Jhajharia Beginner
      2021-11-20T08:20:58+05:30Added an answer on November 20, 2021 at 8:20 am

      It simply means how much cash you require to purchase each constituents (to increase each by 3%) to rebalance the portfolio. So increasing each constituents by 3% will ensure that security weights are same. And the cash required to do so will be 3% of the market value of the securities. Note that you are not adding cash to the portfolio but using cash to buy the constituents so as to rebalance it to the initial target weights.

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    5. Saharsh Jhajharia
      Saharsh Jhajharia Beginner
      2021-11-20T08:21:20+05:30Added an answer on November 20, 2021 at 8:21 am

      It simply means how much cash you require to purchase each constituents (to increase each by 3%) to rebalance the portfolio. So increasing each constituents by 3% will ensure that security weights are same. And the cash required to do so will be 3% of the market value of the securities. Note that you are not adding cash to the portfolio but using cash to buy the constituents so as to rebalance it to the initial target weights.

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    6. anandjasrapuria
      anandjasrapuria Beginner
      2023-04-15T22:05:48+05:30Added an answer on April 15, 2023 at 10:05 pm

      Where can we get CFA Level 3 AM session past exam questions?

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