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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
Q

UPIA stands for and ensures?

A

uniform principal and interest act - distribute principal and income if necessary to ensure intention of trust creator

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26
Q

reason to use info ratio over Sharpe

A

track consistency of performance

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27
Q

log returns utilize which measure of risk

A

st dev

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28
Q

Beta measures more or less of ___ risk

A

systematic

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29
Q

Use what to measure systematic risk?

A

Beta, not Treynor

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30
Q

Portfolio variance uses variance of investments and ?

A

covariances

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31
Q

what ratio to use for compensating for bad risk

A

sortino ratio

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32
Q

what return method to use for an investor’s OWN portfolio (not manager’s)

A

money-weighted

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33
Q

what performance measure to use for bull and bear markets

A

absolute performance

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34
Q

LIPPER rates __ with ___?

A

rates mutual funds, 5 factor rating

35
Q

Sharpe ratio analyze whether performance can be that of?

A

style

36
Q

sequencing risk is what and affects what phase?

A

risk created by withdrawals from returns made. affects decumulation phase

37
Q

shortfall risk is what

A

risk of exceeding max acceptable dollar loss

38
Q

omega ratio is measured relative to what

A

a target return

39
Q

omega ratio doesn’t require what (in relation to distribution)

A

normally distributed returns

40
Q

R sq - what is considered a good benchmark?

A

85-100%

41
Q

what was created for institutions to use MPT

A

black-litterman model

42
Q

black-litterman model uses what 2 factors

A

mean variance and CAPM

43
Q

Believers of MPT do what in bull and bear markets?

A

Bull: maintain position
Bear: rebalance

44
Q

Skewness measures future data points in relation to what?

A

mean

45
Q

regulators use VaR for?

A

to gauge assets to cover loss

46
Q

RSI over what is considered overbought? Investors should anticipate what in the market and should proceed to?

A

70 - investors should anticipate a correction/retracement and should sell asset

47
Q

RSI below what is considered what? Investors should anticipate what in the market and should proceed to?

A

30, oversold - investors should anticipate a reversal and should buy asset

48
Q

DAA for institutions are linked to what

A

floating rate

49
Q

Preservers need to be given what kind of information, and not what?

A

big picture, not sharpe ratios

50
Q

overcome follower bias

A

give data in great detail

51
Q

independents need to reflect on?

A

investments in great detail

52
Q

how should advisors handle accumulators?

A

take control of investments

53
Q

CAPM need to adjust what to take advantage of market movement

A

Beta

54
Q

mortgage backed security not subject to what kind of risk

A

corporate risk

55
Q

Bloomberg Barclays index do not list what

A

TIPS

56
Q

real estate income based valuation formula

A

NOI/cap rate

57
Q

stock price and revenue is the basis for what valuation?

A

price/sales

58
Q

Book values only considers what kind of assets

A

hard assets

59
Q

derivative strategy for a long position with gains and want to lock in small range

A

collar

60
Q

FX market location

A

no physical location

61
Q

what kind of REIT is an alternative asset

A

private REIT. Real estate not an alternative asset unless it is a private REIT

62
Q

directional absolute looks for what kind of returns?

A

stock like returns

63
Q

Earnings is g=

A

ROE* plowback ratio

64
Q

WACC formula is for evaluating firm or equity

A

firm

65
Q

WACC is the ___?

A

minimum return on investment at which company yields for investors

66
Q

PEG formula

A

P/E ratio / growth

67
Q

Price Weighted:
Returns based on what and affected by what
Example Index

A

Based on buy and hold portfolio of equal # of shares in each firm
affected by stock splits
Index: Dow Jones

68
Q

Risk weighted based on

A

based on asset risk

69
Q

Equal weighted:
-aka what
-need to do what more frequently
-vulnerable to what

A

-aka unweighted
-need to rebalance a lot
-vulnerable to sudden drops during bear markets

70
Q

Bonds that are most sensitive to interest changes

A

zero-coupon

71
Q

buying vs writing straddles (in terms of market outlook)

A

buy: market will move in one direction or another
write: market will not move, hope there is no change

72
Q

interest rate futures means future deliveries of ___

A

deliveries of any interest bearing asset

73
Q

is real estate an alternative asset?

A

No, unless it is a private REIT

74
Q

Discount rate when evaluating debt then apply what formula

A

R(d) , apply CAPM

75
Q

Discount rate when evaluating Equity then apply what formula

A

R(e) , apply CAPM

76
Q

Discount rate when evaluating Firm then apply what formula

A

WACC or R(a) , apply CAPM

77
Q

Dedicated short bias:
-what kind of strategy
-net what position
-captures ___ when the market is ____

A

-directional trading strategy
-net short position
-capture profits when market is down

78
Q

Market Neutral:
matches __ and __ ; amounts are ____
attempts to avoid what?
a form of what kind of bias

A

matches long and short positions. amounts are equal
attempts to completely avoid market risk
a form of long/short bias

79
Q

absolute return strategy:
attempts to hedge what
concentrates purely on what

A

attempts to hedge away market risk
concentrates on manager alpha

80
Q

Managed futures provides?

A

portfolio and market diversifcation

81
Q

When to make defensive style investments

A

in advance of volatility

82
Q

bonds with __ convexity outperform bonds with ___ convexity in both bear and bull markets

A

higher convexity outperforms lower convexity

83
Q

Callable bonds have __ convexity at lower yields

A

negative (or lower)

84
Q

traditional fixed rate or putable bonds have ___ convexity at all yields

A

positive

CIMA (6 decks)

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