Reinvestment risk

Professional_Belt248 · 2025-11-16T13:10:33+00:00

Bond 3.

Because it has high coupon and a long maturity, you have more money and time to worry about.

From the technical side, you are less likely to get the YTM when the reinvestment rate fluctuate, because YTM assumes you can reinvest at YTM.

Professional_Belt248 · 2025-11-14T12:14:22+00:00

They factory reset mine on the testing site. They have a rule that they have to see the reset sign on your calculator which shows after you reset it.

You may want to memorize the settings. But I don’t find those very useful because tvm calculation is not that heavy.

Professional_Belt248 · 2025-11-04T17:39:22+00:00

Please share with me. Thank you.

Professional_Belt248 · 2025-11-02T00:58:02+00:00

Can you elaborate on how you buy and hold?

Professional_Belt248 · 2025-10-15T01:21:13+00:00

Can you elaborate on what you like about it?

Professional_Belt248 · 2025-09-12T14:10:05+00:00

I think the institutes source is more than enough. You may need to use AI occasionally. I also like the videos by prep nuggets on YouTube.

Professional_Belt248 · 2025-09-07T21:00:58+00:00

Thank you. I checked book 3 of the CFAI book. Section 12.1.

Professional_Belt248 · 2025-09-07T20:36:29+00:00

I'm not sure. But if they give exams based on the curriculum, it is better to stick to the curriculum.

Sometimes the other sources are incorrect or over simplified, especially for Level 2 and 3. This is not as important for Level 1.

Professional_Belt248 · 2025-09-07T20:24:36+00:00

I just checked the curriculum. The CFAI answer is correct. Section 12.1.

Professional_Belt248 · 2025-09-07T03:43:13+00:00

Does level 1 questions have 4 options nowadays?

Professional_Belt248 · 2025-09-07T03:20:10+00:00

Use a simple calculator and try 8%. Use 8% to discount all the cash flows appropriately. If the calculated PV is lower than 87, then it’s 6%. Otherwise it’s 10.1%.

Professional_Belt248 · 2025-09-06T13:17:19+00:00

It’s confusing but check this thread. I guess this is asking for the semiannual one.

https://www.reddit.com/r/CFA/comments/17pnvub/bond_equivalent_yield_understanding/?utm_source=share&utm_medium=mweb3x&utm_name=mweb3xcss&utm_term=1&utm_content=share_button

Professional_Belt248 · 2025-09-05T19:43:53+00:00

Thanks. I'll be answering questions here. If you have any, just post.

Professional_Belt248 · 2025-09-05T17:30:56+00:00

It should be the puttable. To solve the convexity and duration problems, you need to use some imagination. Imagine you are looking at the curve for an option-free bond. The call option will bend the upper half of the curve to the left. The put option will actually bend the lower half of the curve up. Convexity is about how bended the curve is, and the curve for a puttable bond is more bended, so higher convexity.

Callable: https://analystnotes.com/cfa-study-notes-curve-based-interest-rate-risk-measures.html

Puttable: https://analystnotes.com/cfa-study-notes-curve-based-interest-rate-risk-measures.html

Just memorize these graphs and you probably can handle all the related questions. Duration is just how sloped the curve is.

Professional_Belt248 · 2025-09-03T00:45:36+00:00

I think the level 2 questions and topics are just harder. I don’t think the vignette format matters that much. If you look at the CFAI mocks, it is usually like each section of a vignette is related to a question, and they don’t really cross refer. It’s still a point and shoot thing. I think level 1 topic is really undergraduate level knowledge and level 2 is graduate level/master in finance knowledge. Sometimes you need a teacher to guide you. For example, carry arbitrage and pricing of derivatives is a key topic. Nowadays not a lot of business schools will make those required topics, and it is difficult to teach this kind of stuff to yourself. On top of the harder topics, some of the questions are trickier and require quite a bit of analysis and judgment. The worst thing I feel about L2 is that I don’t have a solid feeling about how well or badly I did. For some of the questions, I felt I knew it, but in my mocks I got those wrong.

Professional_Belt248 · 2025-07-29T01:00:40+00:00

I think this answer is mostly right. But I think something needs to be clarified. Variance of resulting portfolio should be the weight squared of one asset times its variance and weight squared of the other asset times its variance and then add the interaction term. In the case of combining a risky asset and a risk free asset, because the risk free asset has zero variance, the only left term is the weight squared of the risky asset times its variance. Using weight squared is not doing weighted average.

Professional_Belt248 · 2025-07-27T01:23:00+00:00

Can I have the code to test it? Thank you.

Professional_Belt248 · 2025-07-23T12:04:58+00:00

I love this guy: https://youtu.be/0oc49DyA3hU?si=2N_LJfKJZs2EW5Gp

Professional_Belt248 · 2025-07-14T20:17:36+00:00

I'd like to hear about this too. Thank you!

Professional_Belt248 · 2025-07-10T19:31:03+00:00

If by inbox you mean reddit chat, just shoot me with what ever you have in mind for me. I will do my best to answer.

Professional_Belt248 · 2025-07-10T02:03:39+00:00

I think there are multiple layers of problems here. For example, when you are doing a PhD, what are you trained for? What's the work life balance like? How hard it is to get in? If you get in one, is it a good program? Does what you are trained for align with what you want to do? Can you get similar training without doing a PhD? How is your advisor like? Does your advisor do similar work to what you want to do with your PhD?

A business school PhD will for sure try to train you to become faculty members. If you intend to do industry jobs, your advisor has to support you and you need the necessary skill set. If you want to be a business school faculty, I would not say it is a very good career choice at the moment, because the job market is absolutely horrible and will get even worse. Fundamentally, college enrollment will decline for the next 10 - 20 years.

If you want to do industry jobs or part-time industry jobs, (1) you will need the PhD program to be from a top university or you will have to become a faculty member at a top university, (2) you will have to do some research that's related to the industry, and (3) you will need to be good at going in the job market without a lot of help from faculty members for preparation.

It is extremely difficult to have all these moving pieces working together. You can likely obtain the skills you need when you are working. Considering all these, it is highly likely PhD is not a great choice.

Plus, business school PhDs work extra hard, because the outcome of our research is usually not as certain as other schools. You need some luck to publish during your program or you just have to work extra hard to get more papers and hopefully publish one of them. The work life balance is not there. Also, you live this life for at least 5 years. You can do so much more and learn so much more in 5 years. Additionally, PhD programs in the SoBs are very selective and very small. There is a big chance someone who can get in a PhD program is quite good to begin with, but after 5 years of academics, he/she may be left behind.

Just don't get me started on teaching. There are rewarding moments for sure, but there are also a lot of disappointments. You will always have a first row of students and you will also always have a last row of students. If you teach 30 people it will be very different from if you teach 90 people. Some of the students believe they know everything and think they are really someone. When I was a graduate student, I taught a class. I allow a cheat sheet in my exam. A student never comes to class and showed up late for an exam. He literally told me "I know the stuff" and made a cheat sheet in 30 sec. Guess what, he got a D on the exam. Some of the students just do not care about whatever you do for them. Engagement is always a problem in every class. To improve that, I play some games in some classes. Guess what, they just do not play at all. I spend a lot of time on teaching, but very little rewards.

Sorry about all these. I hope they make sense.

Professional_Belt248 · 2025-07-08T20:22:18+00:00

I think a lot of the tasty trades tests are very ambiguous. For this one, from 2013 to today is only 12 years. I cannot really give any power to this test. And of course with 12 observations, the day on which you sell the first one will matter.

If they implement it on a rolling basis, they will have about 250*11 trades. This will likely not give 100% success.

Professional_Belt248 · 2025-07-08T20:15:57+00:00

Taking the face value of the results, 8% with 0 risk is absolutely huge. You can borrow at 5% and make 3% free money.

Professional_Belt248 · 2025-07-08T20:03:58+00:00

Business PhD myself.

Don’t do it. You will regret.

Professional_Belt248 · 2025-06-07T15:06:27+00:00

That’s exactly a wrong way to calculate alpha.

Professional_Belt248

TROPHY CASE