## Monday, May 6, 2013

### Crash Course for CFA L2 2016

Focus on top questions:

Upstep u d p etc prob [1+rf-d] / [u-d] and exponential formula - binomial tree e to power 2 sigma derivation
Persistence factor
H model: D0 is D: [D(1+gl) + DH(gs-gl)]/[r-gl]
Pure active / portfolio systematic risk... analyst R square .. stropness of alpha
Justified P/S = Net profit margin * Justified traling p/e = E/S into 1-b into 1+g whole divided by r- g
portfolio is entirely new- Portfolio with similar securities: 1/n*sigma-square + (n-1)/n Cov
Private Euity numerical on Drawn, return big table etc

Important Points
real estate table numerical with properly values
Portfolio has many new things
irr using calculator - check all tests in calculator
other topics using calculator like capital budgeting
ratio current temporal rates
corp finance - many numericals -
secret sauce video on things that are missed
theory last chapter of mbs and trenching data
contraction risk in MBS

List of Formulas that might give trouble:

Difference makers: FSA currency traslation, FSA accruals...
Quant Difference makers: regression, time series, arch, inetere rate questioins, binomial trees, oas, cpr etc.
Equity: same .. easy...

Ethics:
Research reports and soft dollars... what is allowed while making research reports....consensus

Quant: log taking with ARCH with multi series and combining things contegration of quant
Residual income formula long one: B + [(Roe-r)*B]/[r-g]
Economics revision : interest formula don't work, complex version of swaps due twister spots and semi annual payments

Derivatives: interest rate numerical with swap and payment and selection of interest rates is tricky, also the pv factor formula didn't work. in all interest rate derivatives is an area that you should explore.
fixed income seems to be in control
interest rate problems fir tree didn't work, make trees on MATLAB for trees
regression with high level of theory - this tricky
convexity formulas
FRA Agreement
FI CPR the 30 month formula where 1- CPR = (1- SMM)^12 ... CPR= months * .2%* Times PSA
FSA formulas from question
Currency swap
Interest rate swap: [1-Zn]/[z1 + z2...zn]
transition current
soft dollar research objectivity new prudent rule, old standard
Fama: Market risk + small cal risk + value risk
Eqity: Rolls model confident risk , build up, pastur liquid factor,
DDM P/E multiple: 1-b divided by r- g
P/B = ROE-g divided by r-g
premium control not control - private company
interest rate swap / currency swap / fra
credit derivatives
Whats solution for very long divident questions
Reits  funds from operation
MM numerical new formula n terms
Information ratio = active risk / active return
Quant, is model good Ftest, hetroskedicity present: Pagan, removal white... Serial correlation present: Derban whatson (2(1-r)) smaller postiive larger negative in between inconclusive removal: Hanse...
Testing of the above 2 tests is imp
Adj R-square 1 - [n-1 / n-k-1]* [1-R-square]
b0/[1-b1]
HHI Summation of MS*100, when is it concentrated? 1000-1800
Favorable income per share = (Coupon - Conversion Ratio *  DPS )/conversion ratio
most trouble maker is currency translation in accounting
linking the pension translation from 10k into reality to make it easy

1) employee benefits - Questions from Main curriculum
2) quants - economics paper - get this done for conference  - liniked with pp
Regression and quant and D test - issues with regression in excel file
3) Lessons we learn
4) Evaluating Financial reporting Quality
5) Integration of FSA
6) Portfolio - done except

Reviews:
Exam still has 50% theory - and numerical are the easy ones

AI: Real estate numerical and quant involved.
Private equity valuations
Biggest drag all down is FRA

turning exam real with real quant everywhere.

--Thanks