Errors Found in Study Materials P1.T3. Financial Markets & Products (OLD thread)

[Nicole Seaman]

Hi @David Harper CFA FRM , @Nicole Seaman,it is my bad the error is in question set of Hull page no.138. Sorry I wrongly tagged it as a error in notes but it is in Question set. If you look at the highlighted text in the below document it says 0.5*30^2*0.0035 = 0.55125% . But it should read "0.5*30^2*0.0035^2 = 0.55125%".

Sorry once again for my mistake to give the reference of the document.

View attachment 1530

Thanks,
Abhishek

@Abchaudh

Thank you for confirming that it is an error in the PQ set. This error has been pointed out and tagged in the correct PQ forum thread already, so it is on our list to correct in the updated version that we will publish shortly.

Thank you,
Nicole

 

[MNBS]

Hi, I am not able to download the Financial Markets & Products Quiz pdf, the other topics downloaded with no problem.

 

[Nicole Seaman]

Hi, I am not able to download the Financial Markets & Products Quiz pdf, the other topics downloaded with no problem.

Hello @MNBS

We appreciate you pointing this out. I've fixed the error in the quiz, and you should have no issues downloading the PDF now.

Thank you,

Nicole

 

[FlorenceCC]

Hi @David Harper CFA FRM , @Nicole Seaman ,

Regarding Hull, Chapter 1: Introduction (Options, Futures and other Derivatives), p12 of BT study notes read "Options like futures provide a form of leverage". While I agree on the leverage part, is it not a mistake to refer to futures as options, since they are on the contrary binding agreements?
Apologies if I misunderstood something

Thank you, Florence.

 

[Nicole Seaman]

Hi @David Harper CFA FRM , @Nicole Seaman ,

Regarding Hull, Chapter 1: Introduction (Options, Futures and other Derivatives), p12 of BT study notes read "Options like futures provide a form of leverage". While I agree on the leverage part, is it not a mistake to refer to futures as options, since they are on the contrary binding agreements?
Apologies if I misunderstood something

Thank you, Florence.

Hello @FlorenceCC

It looks like the sentence is just comparing the two. It is not saying that futures are options, but rather that they are similar in that they provide a form of leverage. The sentence should probably include punctuation to state, "Options, like futures, provide a form of leverage". I'm not sure if this answers your question, but I believe it just has to do with how you read the sentence. David can correct me if I'm wrong, but I'm just trying to help him out with the overload of questions in the forum right now

Nicole

 

[David Harper CFA FRM]

Excellent @Nicole Seaman ! Yes @FlorenceCC I don't perceive the sentence to be confusing futures with options. In general, derivatives (including but not limited to options and futures) provide leverage simply because they are not funded. This is thematic. If you buy a stock the old-fashioned way it is a funded purchase: you pay cash to own the share. Derivatives (sans collateral consideration) are unfunded: you promise to make a future payment depending on some formulaic reference to a notional amount; as you don't use your cash, you gain automatic leverage. Hence, the funding of principal versus the reference to (unfunded) notional. The thematic keyword groupings are something like: "cash (spot) funded principal not-leveraged" versus "derivative unfunded notional leveraged." Thanks!

 

[FlorenceCC]

Aaah of course, sorry!! Thank you very much @Nicole Seaman and @David Harper CFA FRM - and apologies for misinterpreting the sentence.

 

[FlorenceCC]

Hello,

Just a couple of possible typos I have noticed related to the study notes on Hull Chapter 6 - Interest Rates futures.

under the LO "Calculate the final contract price on a Eurodollar futures contract", the June (settlement) contract price reads 990,037.75 instead of the actual 999,037.75 (as per calculations).
In addition, the conclusion in the notes may not be the right one?? In our example, our ED futures quote decreased by 0.11 and the price of our contract decreased between May and June. Should this not represent a loss on our long position? Notes say $275 gain. This would also be consistent with note at the bottom of the page indicating that a 1bp increase in the futures quote correspond to a $25 gain on the long position.

Regards

Florence

 

[Nicole Seaman]

Hello,

Just a couple of possible typos I have noticed related to the study notes and questions on Hull Chapter 6 - Interest Rates futures.

-> Question 719.2 (P1.T3.719. Quoted versus cash bond prices) : the choice of possible answers does not actually include the correct answer (7.14748%). Instead, choice D reads 7.000000%;
-> In the study notes for Chapter 6, very small typo under the LO "Calculate the final contract price on a Eurodollar futures contract", the June (settlement) contract price reads 990,037.75 instead of the actual 999,037.75 (as per calculations).
In addition, the conclusion in the notes may not be the right one?? In our example, our ED futures quote decreased by 0.11 and the price of our contract decreased between May and June. Should this not represent a loss on our long position? Notes say $275 gain. This would also be consistent with note at the bottom of the page indicating that a 1bp increase in the futures quote correspond to a $25 gain on the long position.

Regards

Florence

@FlorenceCC

We will take a look at the study notes to confirm there is an error there. Regarding the error in the practice question set, please note that this thread is only for study note errors. Any errors that you find in the practice questions should be posted in their individual forum thread where the PQ originated (the link that is provided on the answer sheets of the PQ pdf in the study planner). The correct thread where this should be posted is here: https://forum.bionicturtle.com/thre...-bond-prices-hull-chapter-6.10627/#post-51741. If you can post your question about 719.2 in that thread, I can delete it from the thread here. This helps with our forum organization.

Thanks!

Nicole

 

[FlorenceCC]

@Nicole Seaman , done!

 

[pengfrm]

Hello,

I hope this is in the right section:

Anthony Saunders and Marcia Millon Cornett, Financial Institutions Management: A Risk Management Approach

The part with Hull, Chapter 3 End of Chapter Questions & Answers

Question 13.10, page 28

Exchange rate given as Brazilian real 0.5/$1

$100m/0.5 = to 200m Brazilian real seems wrong to me, should instead be 50m Brazilian real ($100m x 0.5 R$/$1)
(compare also to SF/$ rate and calculation in question 13.12)

 

[David Harper CFA FRM]

Hi @pengfrm (Is your Hull reference meaningful here?) That's a super sweet catch, love your attention to detail. I agree. The question follows his pattern in 13-1 so I'm able to easily insert into our XLS. It appears to be an interim typo only, as I am getting to the same conclusion given (i.e., 1.0% ROI). Here is my XLS https://www.dropbox.com/s/o42k5w4vgoez5te/082118-saunders-eoc-13-10.xlsx?dl=0 Thank you for sharing your finding, this informs improvements!

 

[Branislav]

Dear David, maybe irrelevant but just saw one correction on this slide, should be put instead call.
Please check if I am wright, and if this kind of corrections are not that much important ( just a typo correction I believe), please advice me not to bother forums with this notifications.
Best regards

 

[David Harper CFA FRM]

Hi @Branislav Yes, thank you. Indeed, that is my typo. Yes, actually, we always do appreciate error/typo notifications, no matter how small: the study of risk includes, by definition, an attention to detail. (cc @Nicole Seaman where should this be located?) Thanks!

 

[Nicole Seaman]

Dear David, maybe irrelevant but just saw one correction on this slide, should be put instead call.
Please check if I am wright, and if this kind of corrections are not that much important ( just a typo correction I believe), please advice me not to bother forums with this notifications.
Best regards
View attachment 1966

Hi @Branislav Yes, thank you. Indeed, that is my typo. Yes, actually, we always do appreciate error/typo notifications, no matter how small: the study of risk includes, by definition, an attention to detail. (cc @Nicole Seaman where should this be located?) Thanks!

@Branislav @David Harper CFA FRM

I moved your helpful error post here to this thread. There are threads for each topic in the forum to report errors like this. I originally created them for just the study notes, but I'm editing the title of the threads to show study notes & videos to make it more clear.

Thank you!

Nicole

 

[hung312312]

R19.P1.T3.Hull Pages 104, I think the calculation for the total gains is wrong. 1.20%-0.7% should be 0.5%

 

[David Harper CFA FRM]

Thank you @hung312312 You are absolutely correct. Apologies. But thank you! cc @Nicole Seaman on page 104 of the huge Hull R19 study note, the 4th bullet should replace the final 0.70% with 0.50%, such that it should read:

• The total advantage is given by the difference between the respective rate differentials. Specifically, in this case, the fixed rate differential equals 1.20% ( = 5.20% - 4.00%) and the floating-rate differential equals 0.70% ( = 0.60% + 0.10%). The total gain equals 0.50% = 1.20% - 0.70%.

FIXED IN PDF v9

 

[eldakrory]

Hello, Tuckman ch.20, the instruction video ends at the beginning of slide 38!! rest of the chapter's video instruction is missing.

 

[David Harper CFA FRM]

Hi @eldakrory I see what you mean, apologies .... cc @Nicole Seaman not sure why this video is chopped?

 

[Nicole Seaman]

Hello, Tuckman ch.20, the instruction video ends at the beginning of slide 38!! rest of the chapter's video instruction is missing.

Hi @eldakrory I see what you mean, apologies .... cc @Nicole Seaman not sure why this video is chopped?

@eldakrory @David Harper CFA FRM

I will take a look at this video to see what happened. Also, please note that I am moving this into the error thread, as it was posted in the YouTube section, but this is not in reference to a YouTube video. Any time that you find errors in the Study Planner notes or videos, please make sure to post them in the correct error thread.

Thank you,

Nicole