Bootstrapping computing, require, across, should, states

wonderfuldream

Hi all,

The Professor's Note on Page 111 of Schweser Book 5 states that we are responsible for "describing" this methodology (bootstrapping), not for "computing" theoretical spot rates. However I have come across questions in the CFAI text and Q Bank that require you to carry out the bootstrapping calculation.

Can anyone tell me if we should be memorizing the calculation for the exam???

eagles_dare13

Yes.

Edit: Actually, if you understand the concept, it is unlikely that much memorization is involved. Intuitively, if you know the prices of various bonds whose coupon payments can be made to cancel each other out, you can derive the spot rates for any of those coupon terms.



Edited 1 time(s). Last edit at Wednesday, September 16, 2009 at 10:15AM by Hello Mister Walrus.

disiz64

Thanks, appreciate it!

JRossSter

Unless they have changed the LOS from when i took the exam 3 years ago, you could end up calculating it. CFAI says the questions at the end of the readings are fair game.

MonkeyBusiness

It's possible, but it's more likely that you'd see a conceptual type of question on bootstrapping than the actual calculation.

soddy1979

dont always rely on schweser prof. L2 guys still swear by the Treynor black qn in 2007