Someone approached me recently with this interesting method of memorising formulae. I’m not too convinced that it would work for me, but I’m really interested to see if it works for others. You can see a demonstration of memorising a so-called ‘longest CFA formula in the syllabus’ here:
Cast your vote on whether this approach works for you! The website is http://www.memorygiant.co if you want to learn more.
Wow, you guys really like to make things complicated. Try to understand what you are doing instead of memorising. It will help a lot!
Lets see from your whatever grade calculus (a+b)^2 = a^2+b^2+2ab … looks familiar? I am sure you know and remember this.
If you have Sp^2 = (SaWa + SbWb)^2 here. Where Sa is Sigma a and Wa is the Weight of a.
If you use my first formula you see that you have SaWa^2 + SbWb^2 + 2WaWbSaSb. The only thing missing here is the Rab on 2WaWbRabSaSb, true that. My method is not mathematically perfect … and it is not trying to be. I haven’t derived the formula with the proper method, just showed how you can quickly remember where the ^2 goes or if there is a “times 2” somewhere. If you remember that Cov(A,b) = RabSaSb (and you will need that for other questions), then you have mastered the formula because you understand it.
Now, the proper way to remember the total risk of any portfolio using the Covariance Matrix and weights is to think in term of matrices.
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