rsparks

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I read the above comment and stopped reading after three words in. Rather than a ‘cut and paste type my own thing’, let’s look at simplifying it down.

read up on the put call parity formula; you will need to know this for the exam anyway. It should be in the derivatives section :p

in laymen terms:

covered call: you buy the stock (take the long position), but you hedge against the stock by covering yourself with selling a call in case the stock price drops. This will limit your upside potential, but will define your risk if the stock drops in price. you do collect the premium of selling the call.

Investors do this as over time you can effectively use the premium (premium is one of the terms used when you sell options and collect mullah) you collect to reduce your break even. So, if you bought a stock at $25 and sold a call option at $26 you collect the $1 premium off the sale of the option contract and can use that payment to reduce the stock you bought at $25 to now be $24; provided the stock stays below $26. Overtime you can see that this could end up paying back your initial investment of the stock (neat idea to keep in mind).

Fiduciary call: you buy a call option, but you also buy a bond. So, nothing like a covered call but it has a similar strategy at reducing what you pay for the call (like collecting premium to the stock you bought with a covered call). 

To cover your cost of buying the option, you take the PV of the strike price, say $26 strike like the example above on an option contract that will expire in 45 days. You discount this future $26 back todays present value. You take the present value amount and invest it in a bond that will yield you 45 day return. This return will reduce the cost you had to pay for the $26 strike option contract.

if you know the put call parity formula, it becomes more interesting as well. Rather than buy a stock you create a synthetic position of the stock that should yield the same return as the stock without buying the stock:

Simply put call parity: stock + buy put option = buy call option + PV of strike price 

With algebra on the above formula you can have a synthetic stock by:

sythentic stock = sell put option + buy call option + pv of the strike invested in a suitable risk-free rate.

pretty cool huh? There are much more sophisticated formulas on put call parity as well 🙂

I hope this helps and if you have any more questions feel free to ask. Also note that these options are European style option. Like the movie Inception, you start off with the put call parity and then proceed to go three layers down 

-Ron

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CFAI starts from the ground up; however, they do not show you how to calculate on a calculator as an FYI. Watch YouTube vids to help you with that. 

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That’s a loaded question and depends on your style of Learning and experience. Kaplan is quite straightforward and to the point. CFAI material assumes you no nothing and will waffle on for a while. I found the CFAI books to be fine,but the topic quizzes they have online are very subpar. They may have only 50-60 questions for each topic quiz. It is good for an initial assessment, but if you redo the quiz, then you’ll get an over inflated score. You’ll only get two practice exams as well. They give you a full exam for 6 hrs with no way to pause for a break…a bit annoying. I found the Kaplan questions and exams to be better for review. kaplan will def get you over the line as well as IFT or ELan and now Passed Tense is coming up the ranks. Also, if you google this debate, you will get good responses on analyst forum and qora (something like that) as well. You can even YouTube them and they will give you over views too. 

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I studied straight from the curriculum and used Qbank. The biggest factor was actually QBank. CFAI can waffle on at times. I enjoyed the readings a lot more from CFAI except for economics. So it will depend on your preference and time constraints.  If you had 4-5 months, use 3rd party and get to questions. I feel the main emphasis to passing level 1 is questions. You will need to learn how to use a calculator but it isn’t too bad. You can use TI to calculate variance and SD….i didn’t know how to that so watched a video on youtube. If you come across problems and it takes longer than two mins to calculate, then see if there is a more efficient way to use your calculator.

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I work for a superfund australia and we went through a gov’t change on default investment options. we personally had to adjust re-allocations and move 8billion in funds. this was done in stages to minimize the impact on the market and thus not artificially inflate volume which is a major market sentiment indicator. The same would apply to your case.

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the other side to your argument: i met a guy who finished level 2 by the time he graduated and was able to secure a great job at a professional services firm……still had to wait four years for work experience though.

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@jasdev I ended up failing too, band 10. I passed my CA exam though….I got pissed off and signed up for FRM and passed that and also did another CA exam haha. I am hitting CFA again next weekend. Time to get back on the horse. Now I have to way up my last CA exam on 12 June or do it in November. It would mean being a CA in July vs November. If CFA did not change the exam schedule, I would do it as I rather put more energy in an exam that is once a year and then shift to CA ….but they moved the date for religious reasons and religiously screwed with my plan……c’est la vie though

funnily enough, I heard people had to change their wedding days and plans after CFA moved the date.

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Statistics, statistically, seems to be the hardest based on CFA results; however Financial Reporting killed me…it was like they wanted to see how boring they could make it and laugh at our suffering! I would have almost reread a rendition of war and peace or been in a saw-movie-situation than read that topic again lol.

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The B) has made my morning! 

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It’s 3am here and Ive been up watching the football so this may not be correct.

i think u are take d/d+e to get your weights when it should be d/e to get .33 d and .667 e? 100/300?
looks like they are using the firm”s actual weight.

Firms are subject to market, financial and business risk, so you should always end up using the firm’s weight no matter what or leveraging betas of similar companies if you didn’t have the data. Even similar competitors though can have completely different capital structures: Walmart sells more grocery lines than target even though they are competitors. 

Correct me if I’m wrong as I’m off to bed!

Ron

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My friend is level III and has said the schweser exams are harder, so keep that in mind. Also, equity and fixed income get a substantial increase in lvl 2, so always good to review.

I just finished all the readings this week (I’ve spent 4-7hrs per reading) and quit my job. I scored an 85 on my first mock but not sure if that was a fluke. Just keep focusing like you said and keeping reviewing weaker topics. Fra and ethics will be half the passing score!

Ron

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Personally, I felt the AM was harder, but to each their own. In the morning I finished with 10mins to spare and about 20min in the afternoon. I rocked a couple of topics, but not as well as I did on the mocks beforehand. I believe I will be borderline as well. I keep focusing on the questions I know but got wrong on the day, which was 2%, but it could make the difference…The sad thing is with all this, is how much you’ll remember after you get the charter? 

Any other stories besides the questions? I only had about 50% in my area show up on the day, one person didn’t come back for the afternoon session and a person brought in the wrong calculator which was pretty surprising for me. 

I also find it frustrating that the CFA institute does not talk to the respective transportation authorities on the day. Granted a lot of people may find it different than I did, but if they can organise a venue and peeps for the day, then why can they not notify them. Most of you may be in the northern hemisphere enjoying summer after. For me, it’s winter, dark, crap weather and after a 12hr day, I don’t want to stand with 1000s of other people waiting to get on a tram. I ended up walking to the train station only to find it packed with people going to the sports game. All I wanted was to sit my arse down and relax. Next time, I’ll organise someone to come pick me up. However, according to people after the exam it was the same situation over the years as this year, so I will also write them a letter instead of venting on here. I’m just wondering if anyone else has any stories or found things in similar boat?

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You don’t need to learn every formula, but it is important to know when you don’t. For example, I took the time to learn how to calculate kurtosis, but if you pay attention to the LOS and questions, you will not need to know the formula. However, knowing a formula helps you work through a lot of questions where you may not need to plug-and-chug as well; I have found this true in econ for me. 

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So, a 1 x 3 Fra means the contract will expire 30days and will be based on the 60day LIBOR 30 days from now.

where you may be going wrong is the interest rate is annualised, so you will need de-annualise to the 60/360 rate. I believe you are taking the .2% * 1 million notional value; however, see below.

you agreed to enter into a contract at a rate of 1.5% and the market rate 30 days later is 1.7%. So it is good for you. 

The difference between the two rates is .2%. However, this is an annualised rate. .002 * 60 / 360 = .000333

1 million * .000333= $333.33

however we are going to settle at the contract expiration so we need to discount the 333.33 (which is 60 day future value) back to get the present value by today’s market rate of 1.7% (remember to de annualise):

333.33/1 + .017 * 60/360 = $332.3883438

Hope this helps,

-Ron

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I would highly recommend doing a practice exam after the first read through. Dont spend too much time re-reading unless it is a weakness. Plan on 5 practice exam with time for revision. I like to use the below example:

he ceramics teacher announced on opening day that he was dividing the
class into two groups. All those on the left side of the studio, he
said, would be graded solely on the quantity of work they produced, all
those on the right solely on its quality. His procedure was simple: on
the final day of class he would bring in his bathroom scales and weigh
the work of the “quantity” group: fifty pound of pots rated an “A”,
forty pounds a “B”, and so on. Those being graded on “quality”, however,
needed to produce only one pot – albeit a perfect one – to get an “A”.

Well, came grading time and a curious fact emerged: the works of highest quality were all produced by the group being graded for quantity.
It seems that while the “quantity” group was busily churning out piles
of work – and learning from their mistakes – the “quality” group had sat
theorizing about perfection, and in the end had little more to show for
their efforts than grandiose theories and a pile of dead clay.

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I guess since no one else has replied, a majority of my friends found the morning exam quite straight forward, but more challenging in the afternoon. How about you?

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correct. it is the present value of the contract expiration discounted back to the value of today’s offsetting contract (four months into the original contract).

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This is a common question and there is no right or wrong topic. Some like to hit the heavy weight topics: FRA first and get that out the way. Others will save this topic closure for when they take practice exams. I always start with ethics as a way to get my toes wet and then balance some of the heavier topics with lighter ones. After reading Derivatives and Fixed Income, I went to Alternative Investments. You will see overlap in a lot of the areas. If you read quant and then port mgmt, you will be surprised by how much quant will come up, thus making the reading easier. Just read to understand and don’t worry about not remembering at this point. Plan on doing a lot of questions and at least 5 mocks and you will be fine. Always stay positive. Aptitude can always be taught, attitude is much harder. Set expectations with family/friends over the holiday season too.

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honestly it will be hard as there are huge costs in providing visas for internationals where a citizen can do the exact same job. if you  have citizenship, then it will be easier. You will need to look for recruitment agencies that top firms use for overseas talent. CFA charter will help you more. The best prospect now is to work for a company with offices in usa/canada and go on secondment. I’m a USA citizen and now Australian. That is the only way I see people moving and getting hired unless they are coming off on-campus recruitment. Just my 2cents from what i have experience and observed. Europe could be different.

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What if we expanded to include other certs: CAIA, FRM, etc. However, I can see reasons against as well.

Feedback column where responses can be easily tailored for feedback only

I would like a split between careers section and networking or maybe separate ‘study buddy’ for ease of finding study partners in your area.

i’m at work, so not a full, thought-out response 😛

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