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LOS i: Distinguish among linear, concave, and convex rebalancing strategies. ffice ffice" />
Q1. A constant proportion portfolio insurance (CPPI) strategy:
A) performs well in flat, oscillating markets.
B) represents the sale of portfolio insurance.
C) represents the purchase of portfolio insurance.
Correct answer is C)
CPPI represents the purchase of portfolio insurance. Constant mix performs best in flat, oscillating markets.
Q2. Which of the following statements about asset allocation strategies is FALSE?
A) Strategies for which the slope of the exposure diagram is greater than one give rise to concave payoff diagrams.
B) The constant proportion portfolio insurance (CPPI) strategy has a payoff diagram similar to that of a protective put.
C) The constant proportion portfolio insurance (CPPI) strategy is a convex strategy.
Correct answer is A)
An exposure diagram for an asset allocation strategy plots the desired stock position (y-axis) against the value of the portfolio (x-axis). Strategies with concave payoff diagrams (y-axis = portfolio value, x-axis = stock market value), such as the constant mix strategy, have exposure diagrams with slopes between zero and one.
Q3. A constant mix strategy:
A) performs poorly in flat, oscillating markets.
B) performs much like a covered call position.
C) exhibits good upside potential.
Correct answer is B)
Constant mix performs best in flat, oscillating markets, much like a covered call strategy. Constant mix has weak upside potential in that the strategy reduces exposure to risky assets in an increasing market.
Q4. Which of the following statements regarding asset allocation decisions is least accurate?
A) Insured asset allocation is similar to a constant mix-type asset allocation strategy.
B) A strategic asset allocation needs to be rebalanced periodically to maintain the constant asset proportions.
C) A contrarian investment strategy is one where expected returns tend to fall when prices rise.
Correct answer is A)
An insured asset allocation is similar to a constant proportion portfolio insurance strategy.
Q5. Which of the following statements concerning dynamic strategies for asset allocation is FALSE?
A) Constant proportion portfolio insurance sells stocks as they fall and buys stocks as they rise.
B) A constant mix strategy is a concave strategy.
C) Constant mix sells stocks as they fall and buys stocks as they rise.
Correct answer is C)
A constant mix asset allocation strategy buys stocks as they fall and sells stocks as they rise. Both of the other statements given are true.
Q6. Which of the following statements about convex and concave strategies is FALSE?
A) The constant mix payoff curve is concave.
B) For constant proportion portfolio insurance (CPPI) strategies, the payoff curve is concave.
C) No downside protection exists for constant mix strategies.
Correct answer is B)
For CPPI strategies, the payoff curve is convex. The other statements are true.
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发表于 2009-4-10 13:06
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