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On Monday: gain= 2 On Tuesday: loss= -5 so even if investor has not taken out profit the net loss of 3 will drop the initial margin to 1 that is below maintenance margin so investor will need to pay a variation margin on Tuesday. Its assumed i think that investor takes out the profit after each...

Hi there, If you are confident that you can clear than you can try in 2 months. It depend that if you can give these many hours of 350-400 hrs and your easiness with basic math. If you can give these much amount of time then its definitely a try yes you can give the exam this may only. please...

Yes you should know the formula for hypothesis testing like F statistic, Chi statistic etc. You should know each test by heart and how is it carries out. Yes you should know interpretations and appliacation also thanks

kindly refer to the links, http://www.portfolioprobe.com/2013/01/14/the-incoherence-of-risk-coherence/ http://forum.bionicturtle.com/threads/the-incoherence-of-risk-coherence.6646/#post-22421 thanks

From you Equations: RCA = [ ECA * ( ECA + ρAB * ECB ) ] / EC(A+B) à 1 RCB = [ ECB * ( ECB + ρBA *ECA ) ] / EC(A+B) à 2 As portfolio B is more riskier than A it should have more risk contribution in A+B, so that ECB > ECA RCB -RCA = [ ECB * ( ECB + ρBA *ECA ) ] / EC(A+B) - [ ECA * ( ECA + ρAB *...

As illustrated above, I would share an example as why would zero mean is more feasible, if there are 5 observations with .05%,.04%,-.03%,-.01%,.02% mean =.05%+.04%-.03%-.01%+.02%/5=.07/5=.014% which is approx. equal to zero. if we assume mean as it is ...

It depends which risk free rate you are using a 1 yr treasury bill rate or a 10 yr Treasury bond rate. otherwise We assume only a single risk free rate in the CAPM model. thanks

Go to cumulative normal distribution table with negative values of z on left of table. And if value z=-1.65 then look for -1.6 in row and corresponding to this row look fr column .05 and get the corresponding value for z=-1.65. Alternatively Go to cumulative normal distribution table with...

Hi there Warrants issued causes the dilution of the shares. They are given to the employees for performance. Since in the end the shares value gets diluted due to increase in effective no of O/s shares the shareholders holding the shares already in the company pays for them. Thus in the end its...

May be i was confusing , Diversification benefit happens when the overall risk is reduced for the portfolio. The isolated assets A and B are combined to form a lower risk portfolio. Let 500 be total value of portfolio A and 500 be total value of portfolio B . wA=wB=.5 Now EC(A)=sigmaA*z*500 and...

Hi, You said correlation between A and B is not 1. sigma(A)<sigma(B) and corr(A,B)=.4 let suppose, wA=wB=.5 and sigma(B)=.60 very risky due to heavy tails and sigma(A)=.3 now for portfolio sigma(p) will be such that, sigma(p) =sqrt[(.5*.6)^2+(.5*.3)^2+2*(.5*.6)*(.5*.3).4] =>sigma(p)...

CML is the expected return on portfolio versus risk of portfolio line representing the max. sharpe ratio. Here the investor hold the risky market portfolio which has max. sharpe ratio and may not be fully diversified to eliminate unsystematic risk as it cares with only the sharpe ratio(takes...

Backwardation hi, ye there are such some deviation models from capm in curriculum which you should know. If not some day one Q might pop up relating to them in the exam. refer to foundations of risk topic Aims thanks

refer the link http://forum.bionicturtle.com/threads/passed-part-1-and-part-2-but-not-yet-certified-frm.6002/page-5#post-19679 thanks

If people are having hard time where above formula came from i would give u a brief derivation based on var formulas suggested by david E(RA)=Rf+ betaA,1[F1]+betaA,2[F2] E(RB)=Rf+ betaB,1[F1]+betaB,2[F2] Covariance(A,B)= Covar[(Rf+ betaA,1[F1]+betaA,2[F2])*(Rf+ betaB,1[F1]+betaB,2[F2] )]...

Hi there no you don't need to know these sizes of contracts by heart. You should just understand the specifications in the contract as far as i know. otherwise knowing each and every contract terms by heart is not required for the exam. thanks

Hi there, According to CAPM: E(Rp)= Rf+ beta(ERP) is a one factor model. where beta is sensitivity of portfolio to only one factor market. Generalizing to 2 factors the expected portfolio return can be return as, we can do for n factors also.. E(Rp)= Rf+ beta1[F1]+beta2[F2] where beta1 and...

Hi there, The CAPM required rate of return is the opportunity cost of holding the stock so that whatever return foregone by the investor by investing in stock is the minimum return the investor expects from the stock to derive any value. By holding the stock the investor is foregoing return in...

The futures are marked to market daily and therefore settled daily at the end of trading day. SO if you are long futures 970 and the futures drops in value to 950 then the loss of 20 will be deducted from the margins account. And your futures value will be market to market to 950 by the end of...

Sampling is done in MCS aka monte carlo simulations to reduce the standard error. Suppose we have n samples then the standard error of the predicted value is given by sigma/sqrt(n). If you increase the number of samples from n1 to n2 then our standard error will change from SE1=sigma/sqrt(n1)...