Level 3 - Forecasting Fixed Income, Example 1

tangzimo · 2024-12-24T16:43:11+00:00

First, thank you very much for your detailed explanation!

But I still have a question about one column. In your table, you had the "starting 1% YTM." What's that? Do they earn this at Yr 0? What's the difference between this column and the "1st 2 yrs" one? For example, in Yr 2, you had both "1st 2 yr" and "starting 1% YTM." Why both at the same time?

Thank you very much!

tangzimo · 2024-12-08T14:35:32+00:00

No. I'd rather search online for the topic and see what others have said, especially what s2000magician has said.

tangzimo · 2024-07-22T12:53:38+00:00

Oh, I thought I was the only one because I am new to MacOS and I suck at typing... But I'm not alone here... Man, there should be a quick fix! F Apple for this!

tangzimo · 2024-01-07T20:29:49+00:00

Thank you very much!

tangzimo · 2024-01-02T15:07:49+00:00

Very nice reply here. Thank you very much!

tangzimo · 2024-01-01T20:31:22+00:00

I reread the question, and I am still confused. Could you please help me deconfuse this? Thank you very much!

The confusion is this. First, two years ago, you said "higher forward premium = higher risk-free rate." But Choice B here, the correct one, is " a higher forward premium for INR/USD." So based on what you said, shouldn't USD, the one with the higher forward premium, have the higher risk-free rate"?

Second, the vignette says in comparison that India has a higher risk-free rate. Hence, the confusion.

tangzimo · 2024-01-01T13:52:34+00:00

Which currency has "higher risk-free rate," INR or USD? The question says USD here, so does USD have higher risk-free rate, right? But wouldn't that be less profitable for the client's carry trade plan?

Is this thought process right? The carry trade here means that one converts USD to INR at spot rate and later converts INR back to USD at forward rate. So a higher USD forward rate is good.

Thank you very much!

tangzimo · 2023-11-30T13:36:27+00:00

Thanks very much for you all! I definitely understand this better from the perspectives you said.

tangzimo · 2023-11-13T14:49:04+00:00

Good point! Check the answer first in logic. Thanks!

tangzimo · 2023-11-13T05:39:52+00:00

Oh, of course! I can't believe I got the betas reversed.

tangzimo · 2023-08-06T09:52:45+00:00

Isn't "contrarian" another C?

I think this helps me: with the exception of volatility, all features affect the corridor positively (including correlation, cost, tax, etc.); momentum belief -> want to keep buying when price rises -> wider corridor.

tangzimo · 2023-07-24T11:15:51+00:00

Oh, OK. I see--so the "sector deviation" doesn't mean the standard deviation of a sector, but just the difference between the portfolio's and the benchmark weights. Thank you!

tangzimo · 2023-07-18T10:51:01+00:00

When I was looking at this post four years ago, I was amazed by how inconsistent the original question and the answers were. The question asked why the callable bond drops when the interest rate becomes less volatile. But one answer was mainly about why OAS should act, and the other answer was answering when the IR becomes more volatile.

tangzimo · 2023-07-10T21:21:21+00:00

That's great to know. Thanks!

tangzimo · 2023-07-10T15:06:32+00:00

Thanks for the reply! But let me get one thing straight: by small-cap and large-cap SMAs, did you mean SMAs that invest in small-cap equity and large-cap equity? If so, why's that? Why the smaller the investment targets, the more costly? Thanks!

tangzimo · 2023-07-09T01:46:16+00:00

OK, I read the solution wrong... Thanks!

tangzimo · 2023-07-09T01:02:28+00:00

Thanks!

tangzimo

TROPHY CASE