Questions to Review Flashcards
1
Q
Implementation Shortfall
A
- Measures total impact of portfolio performance attributable to implementation costs - Compares actual portfolio performance to hypothetical portfolio based on value of positions with when decisions are reached - Can be used to analyze different components of implementation costs - Requires more extensive transaction data to evaluate trading
2
Q
VWAP
A
- Average price (weighted for corresponding volume) at which a security trades during a given day - Used as a benchmark measure for evaluating trading costs - Ignores opportunity costs if orders are not filled
3
Q
Buy-and-Hold Strategy
A
- Passive strategy that combines risk free assets with risky assets, “do nothing” strategy - Linear payoff diagram
4
Q
Constant Mix Strategy
A
- Dynamic strategy, rebalance asset mix to initial weightings - Concave payoff diagram
5
Q
CPPI
A
- Buy high/sell low dynamic trend following strategy - Good for investors with: zero risk tolerance if portfolio falls to floor/high risk tolerance when cushion is positive - Convex payoff diagram
6
Q
Future value of investment after-tax (accrual)
A
7
Q
Tax drag
A
8
Q
Future value of investment after-tax (capital gains tax)
A
B = cost basis/asset balue at start of period n
9
Q
Future value of investment (wealth tax)
A
10
Q
Weighted average realized tax return (wartr)
A
11
Q
Return after realized taxes (r*)
A
= r(1- wartr)
12
Q
Effective capital gains tax rate (T*)
A
13
Q
Future value of investment (total taxation)
A
14
Q
Accrual equivalent return (RAE)
A
15
Q
Accrual equivalent tax rate (TAE)
A
= 1 - (RAE / r)
16
Q
Tax deferred account (TDA)
FV of $100
A
17
Q
Tax exempt account (TEA)
FV of $100
A
18
Q
RV of tax-free gift
A
19
Q
RV of taxable gift, receiver pays taxes
A
20
Q
FV of taxable gift, donor pays taxes
A
21
Q
RV of charitable donation
A
