Questions to Review Flashcards

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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
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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
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3
Q

Buy-and-Hold Strategy

A
  • Passive strategy that combines risk free assets with risky assets, “do nothing” strategy - Linear payoff diagram
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4
Q

Constant Mix Strategy

A
  • Dynamic strategy, rebalance asset mix to initial weightings - Concave payoff diagram
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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
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6
Q

Future value of investment after-tax (accrual)

A
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7
Q

Tax drag

A
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8
Q

Future value of investment after-tax (capital gains tax)

A

B = cost basis/asset balue at start of period n

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9
Q

Future value of investment (wealth tax)

A
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10
Q

Weighted average realized tax return (wartr)

A
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11
Q

Return after realized taxes (r*)

A

= r(1- wartr)

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12
Q

Effective capital gains tax rate (T*)

A
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13
Q

Future value of investment (total taxation)

A
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14
Q

Accrual equivalent return (RAE)

A
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15
Q

Accrual equivalent tax rate (TAE)

A

= 1 - (RAE / r)

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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
22
Q

Discretionary Trust

A

Trustee determins how the assets are to be distributed

23
Q
A