CFA Level III - Combined Total Formula Mini Test

CFA Level IIIFormula Sheet – Total Combined

http://www.cpa-cfa.org Objectives

Return

Risk

Constraints

Time Horizon

Taxes

Liquidity

Legal & Regulatory

Unique circumstances

1


http://www.cpa-cfa.org

FV Annual Tax (Accrual) =

FV Wealth Based Tax =

FV Deferred Account =

FV Deferred CG (MV = Basis) =

FV Deferred CG (MV ≠ Basis) =

If only a % of cap gains recognized each year (PCG), find equivalent rates

r* = r* =

T* = T* =

%R After Tax =

Accrual Equivalent R After Tax =

Accrual Equivalent Tax rate =

Tax Drag % =

2



P (Joint Survival) yr n =

Core Capital Value yr n =

Real rf =

RV = T ig = T B =

RV After tax taxable gift = (if individual receiving pays)

RV After tax taxable gift = (if bequest pays)

T Exemption Method =

T Credit Method =

T Deduction Method =

T Source =

T Residence =

Operating Assets B =

B =

3


http://www.cpa-cfa.orgCov A,M =

Covariance MatrixCovariance

Equity Bonds

Equity

Bonds

Sensitivity (B) Equity Bonds

Market1

Market2

Cov 1,2 =

Jensen’s Alpha =

Treynor Measure =

Sharpe Ratio =

M2 =

Sortino Ratio =

Downside Deviation =

4



Grinold Kroner E(R) Equity =

Bond yield plus risk premium approach:

Historical equity risk premium =

Expected equity risk premium =

Singer Terhaar E(R) approach:

ERP Full integration =

ERP Full segmentation =

ERP =

E(R) =

Taylor Rule -

R optimal =

PPP Exchange Rate =

Earnings Multiplier Approach:

Earnings multiplier =

5


http://www.cpa-cfa.org Return estimate =

FCFE =

LT Growth Forecast =

Utility Risk Adjusted Return =

Roys Safety Criteria =

Optimal addition to new portfolio =

Corner Portfolio Theorem:

Req Return =

SAA =

No Constraint with Tangency Portfolio:

Req Return =

Variance with Int’l Portfolio = =

Variance FA = =

6


http://www.cpa-cfa.orgCurrency Contribution =

$ Return FA =

Tracking Risk = =

Portfolio spread duration =

Dollar Duration –

DD =

Rebalancing ratio =

Cash needed =

Contingent Immunization Strategy:

Required Terminal Value =

Required Assets at T =

Safety of Margin =

Mean Reversion Analysis =

7



N Futures for Target Duration =

Change in MV Foreign Bond =

Change in D Contribution Foreign Bond =

Levered Portfolio Return =

Levered Portfolio Duration =

Sample Leveraged = Portfolio Duration

Current Spread Payoff =

FX Prem / Disc =

FX Fwd =

Fwd Prem = 8



Int’l Unhedged Return =

Int’l Hedged Return =

Yield Adv Nominal =

Yield Offset A = Yield Offset B =

Positive & Negative Convexity:

Price Increase Change =

Price Decrease Change =

2 Bond Hedge:

1) Price Change for

______ ______ _________________

2) Price Change for

______ ______ _________________

3) Solve for H2 and H10

Level:

9



Twist:

Hedge ratio:

Active Return =

Misfit Return =

Total / Portfolio Active Risk =

IR =

IR =

Swap Price n:

Swap price =

Swap price =

Bootstrapping:

10



F 0,T =

F 0,T =

or

F 0,T = or F 0,T =

FV Storage Costs = =

Lease Rate =

Return C&C Non Loanable =

Return C&C Loanable =

X-Y-Z Crack Spread =

Notional Principal on Fwd =

Long FRA Pmt =

11



Long FRA Pmt 0 =

Historical VAR:

5% VAR =

VAR Point =

Analytical VAR:

5% VAR =

1% VAR =

E(R) Weekly = Std Dev Weekly =

Variance Covariance VAR:

Fwd Asset Price =

Long Fwd Value =

12



FX Fwd Contract Value =

Credit Risk / Amount Owed =

P(R) Hedged =

Translation gain/loss =

Delta Hedge # of Option Contracts =

Change in Delta =

Option premium =

Long FX Option Contract Value / Profit =

Credit Risk / Amount Owed =

NF for Beta =

Return =

NF for Duration =

13



Create Synthetic Position:

NF for Index =

$ Value for Synthetic = to invest in rf bonds

# of Synthetic Stk = Effective rate earned on interest rate swap:

1a) Interest rate payoff, call =

1b) Interest rate payoff, put =

2) FV option premium =

3) Interest income =

4) Effective rate earned =

Long Call VT = Long Put VT =

Short Call VT = Short Put VT =

Collar -

VT = PU,T =

Profit = Max Profit =

14


http://www.cpa-cfa.orgB/E = Max Loss =

Straddle -

VT =


B/E = Max Loss =

Bull spread -

VT = PU,T =


B/E = Max Loss =

Bear spread -

VT =


B/E = Max Loss =

Butterfly call spread -

VT =


B/E = Max Loss =

15


http://www.cpa-cfa.organd

B/E =

Box Spread -

VT =


B/E = Max Loss =

Swap Notional =

Floating rate note i pmt =

D Floating Quarterly =

D Floating Semi-annual =

D Fixed =

D N year receive fixed, pay floating quarterly =

Effective spread, Buy =

Effective spread, Sell =

VWAP Price =

Estimated implicit costs, Buy = 16



Estimated implicit costs, Sell =

Implementation Shortfall:

Active mgmt return =

Style return =

Information ratio = TWRR =

MWRR:

End value =

Annualized LIRR =

Micro Attribution:

Pure Sector =

Allocation/Selection =

Within Sector =

Macro Attribution:

Asset category =

Benchmark/misfit =

Manager/Active =

17



Global Attribution:

Market allocation =

Currency allocation =

Security allocation =

% R CF End =

R Original Dietz =

R Modified Dietz =

Allocated Cash Beg period method =

Allocated Cash Strategic =

Income tax rate =

GIPS Total Return Real Estate =

18



Income Return ( ) =

Capital Return =

19

Documents

CFA Level III - Combined Total Formula Mini Test