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jbaldyga

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tT
发表于 2011-7-13 00:33 | 只看该作者

Synthetic Cash / Equity

regarding, regular, moving, versus, equity
Can anyone explain to me when we're supposed to use the "synthetic equity formula"

e.g. equitizing t-bills=

(Vp*(1+Rf)^T)/(Pf*Multiplier)


versus using the regular formula (moving beta up from zero)

(Bt-0)/Bf * (Vp/Pf*multiplier)


I don't see a clear distinction regarding when to use one over the other?

 

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Valores

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2#
发表于 2011-7-13 00:45 | 只看该作者
When you are trying to alter your beta to 0 (close to cash), it is a very good aproximation to use the Bt-Bp/Bf * Vp/pf*mul formula, but a true cash allocation would use the Vp(1+rf)^t/pf*mult formula. However, when you use this latter forumla, the portfolio that u are synthically turning into cash must accurately be reflected by the composition underlying the equity futures contract.

Hope this helps.

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NakedPuts00

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3#
发表于 2011-7-13 00:56 | 只看该作者
both formulaes require two different sets of inputs ... i havent seen all of the inputs provided in any of the schweser mocks or samples ... with the inputs provided in any Q, i feel only one of them is readily applicable. I go with that method.

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oneboy

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4#
发表于 2011-7-13 01:07 | 只看该作者
^2009 CFAI mock had a question where you had the data for both

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mar350

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5#
发表于 2011-7-13 01:18 | 只看该作者
can u post how the question was framed...i don't have the 2009 mock

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mik82

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6#
发表于 2011-7-13 01:30 | 只看该作者
Isaac Jeffries is concerned that U.S equities are about to suffer a sharp downturn and wants to convert his current holdings to cash for a period of 3 months.

To achieve Jeffries’ objective, the number of U.S mid-cap equity futures contracts that Michael will sell is closest to...

Then you have both sets of inputs, the answer uses the equitize cash formula...

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Analti_Calte

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7#
发表于 2011-7-13 01:41 | 只看该作者
There's a long thread about this that I started a while ago - pretty good explanations by some people.

Unfortunately, it didn't stick for me and I just got a similar question wrong on a Schweser mock.

Fucking frustrating.

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nannan66

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8#
发表于 2011-7-13 01:52 | 只看该作者
The only thing that would give it away in that case would be the 3 month holding period. The only time I have seen it used is when they are looking for you to equitize/make synthetic cash in the portfolio. If you construct it this way your return will be the risk free rate over a 3 month time horizon. I agree, this is confusing though.

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