Question 29 of the Free sample exam on the CFA website
M12 = (1.2 * 0.9 *0.0225) + (0*0*0.0025)+ ((1.2*0)+(0*0.9)) = 0.0243
I got the answer right, but it was a bit of a fluke. Can someone explain this equation to me. I am too tired at this stage to dig through the books and try to locate it.
Thanks
First part of the equation is sensitivity to factor 1.
Second part of the equation is sensitivity to factor 2.
Third part is the sensitivity to the covariance of the factors.
(A * B * Factor 1) + (C * D * Factor 2) + [(A * D * Covariance Factor) + (B * C * Covariance Factor)]
The book never showed an example where a country had exposure to factor 1 and factor 2.
They used Global Stocks and Global Bonds as the factor and covariance between stocks and bonds.
one factor model extension…
Cov(i,j)=b(i)*b(j)*cov(M,M) — one factor model
Cov(i,j)=sum[b(im)*b(jn)*cov(Fm,Fn)] — two factor model
i,j markets
m,n factors {1,2}
发表于 2013-4-3 09:02
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