CFA CFA Level 3 CFAI 2014 Mock PM C – Allison Q1

CFAI 2014 Mock PM C – Allison Q1

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    • Avatar of vincenttvincentt
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        • CFA Level 3
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        @alta12 thx mate but what formula is this?
        No. of nasdaq futures required to short = 1.05 – 1.2 ($20,000,000/ $124,450) = -24

        I thought it would be:

        (target beta – portfolio beta) / future beta * (portfolio value / contract price) ?

        But we were not given NASDAQ’s future beta?

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        @vincentt‌

        No. of nasdaq futures required to short = 1.05 – 1.2 ($20,000,000/ $124,450) = -24

        Value of portfolio = $20,000,000 x (1 – 0.051) = $18,980,000
        Value of short position = 24 x ($124,450 – $119,347) = +$122,472
        Portfolio Value = $19,102,472

        Portfolio Beta = ($19,102,472/ $20,000,000) – 1 = -0.04488

        Effective Beta = -0.04488/ -0.035 = 1.28 (A)

        I got confused at first as I thought she sold 100 futures. Not sure if this happened to you too.

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        Beta for futures to assumed to be = 1 if not given otherwise.

        Your formula above is the right one.

      • Avatar of vincenttvincentt
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          @alta12 thanks for that, hmm i wonder if schweser really did not mention that because it will always be given or I must have missed it. Just like the duration of a swap is 75% of the remaining maturity. Thanks again!

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