标题: conditional asset class performance / outperformance or investment actions [打印本页] 作者: jcole21 时间: 2011-7-13 13:19 标题: conditional asset class performance / outperformance or investment actions
To stay within code requirements - let me cite the "Bullets vs. Barbells vs. Callables vs. Putables" thread as being the source of this thread - but I think it might be useful to expand this focus to include all conditional settings / and prognostications and actions. The CFAI adore these kinds of questions! To whit - just a couple to get started
Volatility
- expected increases enhances value of options strategies and option values (securities with embedded options may go both ways depending on whether the option benefits the holder or issuer)
Econcomic Cycle
Downward until just before recovery - Bonds Rules
Upward until late upswing - Stock Rule
Interest Rate Trend Upwards / Downwards
- increase contra bond performance
- Swap: lock in fixed payer leg when expected rate increase (investor opposite)
- Swap: lock in fixed receiver/float payer when expected rate decline (investor opposite)
Callables and MBS underperform in with low rates (especially around and below coupon) and outperform on the way up.
Putabables I think also outperform when rates are on the way up (since put option becomes more valuable with right of holder to refinance at higher rate after put) and underperforms on the way down as the value of put diminishes.
Interest Curve Twists
- MBS very sensitive to
- "play the interest curve" - go long with flattening and short with steepening
Flat Market
- Long Butterly spread (especially with increasing volatility)
- Short Straddle
Trending Positive Market
- Bull call spread
Trending Negative Market
- Bear Put Spread
I have only scratched the surface - please add to this list if you think it is useful to think about in the limited time we have - dont depart from your program though!作者: nannan66 时间: 2011-7-13 13:19
Oh and I think I recall in one of the prior exam they extended upon this basic conditional underperformance/outperformance to include both short and long offsetting positions and so you had to assess both dimensions of the position you held. Wow. I bet that question preparer got "employee of the month" for hitting all of the CFA erogenous zones in one 10 minute question.
