Reading 75: Investing in Commodities-LOS c 习题精选 2011, investment, describes, following, active

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Session 18: Alternative Investments
Reading 75: Investing in Commodities

LOS c: Explain why a commodity index strategy is generally considered an active investment.

 

 

Which of the following most accurately describes a reason why a commodity index strategy should be considered an active strategy?

A) Managers choose benchmark index.

B) Index rebalancing due to changing inflation.

C) High turnover of contracts held.

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Commodity index strategies require managers to frequently adjust their positions due to the need to roll over expiring commodity contracts, reweight components due to index rebalancing, and roll over collateral debt securities. Managers who correctly time these activities can add additional return.

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Which of the following activities by a manager using a commodity index strategy is most likely to be classified as active management?

A) Rolling futures contracts over two days before the benchmark’s rollover date.

B) By policy, always rolling expiring 180-day T-Bills posted as collateral into new 180-day T-Bills.

C) Duplicating the component rebalancing scheduling of the benchmark.

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Rolling over futures contracts prior to the index rolling them over would be an example of active management. Managers who roll over contracts early attempt to enhance returns by avoiding the higher rolling costs present when attempting to roll over at the same time as the benchmark. Duplicating the rebalancing schedule of the benchmark and using a fixed rule to roll over posted collateral do not represent value-adding activities by the manager.

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The active management that is required to maintain a long-only commodity index strategy is least likely to affect the:

A) price return.

B) roll yield.

C) collateral yield.

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To maintain long exposure to an index of commodity prices, the manager must periodically roll over expiring futures contracts. The manager must also manage the short-term debt posted as collateral, replacing bills as they mature. The manager can enhance the strategy’s roll yield and collateral yield by carrying out these transactions in ways that minimize costs and take best advantage of market conditions. Price return on the index strategy depends on the direction of prices of the commodities in the index.

luqian55

thanks a lot