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CIMA > Notes > Flashcards

Notes Flashcards

1
Q

Measure what to optimize return to volatility trade-off in portfolio?

A

variance

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2
Q

Trading method to capitalize on extreme price changes

A

mean reversion

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3
Q

Trading method underlying the concept of buy low, sell high

A

mean reversion trading

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4
Q

coefficient of variation is a ratio that evaluates ____? (Risk return what)

A

risk return trade off

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5
Q

coefficient of variation ratio

A

st dev/mean return

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6
Q

how many quarters of declining GDP to be considered a recession?

A

2 or more

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7
Q

CPI captures what

A

fixed basket of goods and services

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8
Q

Keynesian theory and demand side theory

A

aggregate demand can be achieved by stimulating monetary policy

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9
Q

dual mandate of monetary policy

A

stabilize inflation and maximize employment

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10
Q

normal distribution aka ?

A

continuous probability distribution

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11
Q

z-score for 1% VAR

A

2.33 St Dev

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12
Q

z-score for 5% VAR

A

1.645 St Dev

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13
Q

z-score for 10% VAR

A

1.28 St Dev

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14
Q

monte carlo underestimate probability of ?

A

extreme deviations

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15
Q

price prediction uses what 2 factors to estimate valuation (DDM)

A

growth and rate

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16
Q

goals-based objective tames impact of?

A

short term volatility

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17
Q

IPS need to annual review what?

A

taxation

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18
Q

IWI values (4)

A

integrity, loyalty, objectivity, ethical conduct

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19
Q

cash flow matching is what type of strategy?

A

hedging

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20
Q

4 P’s of manager evaluation

A

people, process, performace, portfolio

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21
Q

Conduct in relation to client communications

A

PACT - promptly, appropriate, completely, truthfully

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22
Q

PMR stands for what and must consider? (In terms of fiduciaries)

A

Prudent Man Rule - consider income as well as preservation of capital

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23
Q

UPIR stands for what, added what and follows (2)?

A

uniform prudent investor rule - added derivatives and follows MPT and total return

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24
Q

UPMIF stands for what and purpose?

A

uniform prudent management of institutional funds. Purpose: preserve purchasing power of principle over longer

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25
UPIA stands for and ensures?
uniform principal and interest act - distribute principal and income if necessary to ensure intention of trust creator
26
reason to use info ratio over Sharpe
track consistency of performance
27
log returns utilize which measure of risk
st dev
28
Beta measures more or less of ___ risk
systematic
29
Use what to measure systematic risk?
Beta, not Treynor
30
Portfolio variance uses variance of investments and ?
covariances
31
what ratio to use for compensating for bad risk
sortino ratio
32
what return method to use for an investor's OWN portfolio (not manager's)
money-weighted
33
what performance measure to use for bull and bear markets
absolute performance
34
LIPPER rates __ with ___?
rates mutual funds, 5 factor rating
35
Sharpe ratio analyze whether performance can be that of?
style
36
sequencing risk is what and affects what phase?
risk created by withdrawals from returns made. affects decumulation phase
37
shortfall risk is what
risk of exceeding max acceptable dollar loss
38
omega ratio is measured relative to what
a target return
39
omega ratio doesn't require what (in relation to distribution)
normally distributed returns
40
R sq - what is considered a good benchmark?
85-100%
41
what was created for institutions to use MPT
black-litterman model
42
black-litterman model uses what 2 factors
mean variance and CAPM
43
Believers of MPT do what in bull and bear markets?
Bull: maintain position Bear: rebalance
44
Skewness measures future data points in relation to what?
mean
45
regulators use VaR for?
to gauge assets to cover loss
46
RSI over what is considered overbought? Investors should anticipate what in the market and should proceed to?
70 - investors should anticipate a correction/retracement and should sell asset
47
RSI below what is considered what? Investors should anticipate what in the market and should proceed to?
30, oversold - investors should anticipate a reversal and should buy asset
48
DAA for institutions are linked to what
floating rate
49
Preservers need to be given what kind of information, and not what?
big picture, not sharpe ratios
50
overcome follower bias
give data in great detail
51
independents need to reflect on?
investments in great detail
52
how should advisors handle accumulators?
take control of investments
53
CAPM need to adjust what to take advantage of market movement
Beta
54
mortgage backed security not subject to what kind of risk
corporate risk
55
Bloomberg Barclays index do not list what
TIPS
56
real estate income based valuation formula
NOI/cap rate
57
stock price and revenue is the basis for what valuation?
price/sales
58
Book values only considers what kind of assets
hard assets
59
derivative strategy for a long position with gains and want to lock in small range
collar
60
FX market location
no physical location
61
what kind of REIT is an alternative asset
private REIT. Real estate not an alternative asset unless it is a private REIT
62
directional absolute looks for what kind of returns?
stock like returns
63
Earnings is g=
ROE* plowback ratio
64
WACC formula is for evaluating firm or equity
firm
65
WACC is the ___?
minimum return on investment at which company yields for investors
66
PEG formula
P/E ratio / growth
67
Price Weighted: Returns based on what and affected by what Example Index
Based on buy and hold portfolio of equal # of shares in each firm affected by stock splits Index: Dow Jones
68
Risk weighted based on
based on asset risk
69
Equal weighted: -aka what -need to do what more frequently -vulnerable to what
-aka unweighted -need to rebalance a lot -vulnerable to sudden drops during bear markets
70
Bonds that are most sensitive to interest changes
zero-coupon
71
buying vs writing straddles (in terms of market outlook)
buy: market will move in one direction or another write: market will not move, hope there is no change
72
interest rate futures means future deliveries of ___
deliveries of any interest bearing asset
73
is real estate an alternative asset?
No, unless it is a private REIT
74
Discount rate when evaluating debt then apply what formula
R(d) , apply CAPM
75
Discount rate when evaluating Equity then apply what formula
R(e) , apply CAPM
76
Discount rate when evaluating Firm then apply what formula
WACC or R(a) , apply CAPM
77
Dedicated short bias: -what kind of strategy -net what position -captures ___ when the market is ____
-directional trading strategy -net short position -capture profits when market is down
78
Market Neutral: matches __ and __ ; amounts are ____ attempts to avoid what? a form of what kind of bias
matches long and short positions. amounts are equal attempts to completely avoid market risk a form of long/short bias
79
absolute return strategy: attempts to hedge what concentrates purely on what
attempts to hedge away market risk concentrates on manager alpha
80
Managed futures provides?
portfolio and market diversifcation
81
When to make defensive style investments
in advance of volatility
82
bonds with __ convexity outperform bonds with ___ convexity in both bear and bull markets
higher convexity outperforms lower convexity
83
Callable bonds have __ convexity at lower yields
negative (or lower)
84
traditional fixed rate or putable bonds have ___ convexity at all yields
positive

CIMA (6 decks)

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