MarketLO_sortByLearningOutcome
|
|
|
|
Reading
|
Learning Outcome
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.1: Discuss reasons for the widespread adoption of VAR as a measure of risk.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.2: Define value at risk and calculate VAR for a single asset on both a dollar and percentage basis.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.3: Convert a daily VAR measure into a weekly, monthly, or annual VAR measure.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.4: Discuss assumptions underlying VAR calculations.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.5: Explain why it is best to use continuously compounded rates of return when calculating VAR.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.6: Calculate portfolio VAR and describe the primary factors that affect portfolio risk.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.7: Differentiate between linear and non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.8: Describe the calculation of VAR for a linear derivative.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.9: Explain how the addition of second-order terms through the Taylor approximation improves the estimate of VAR for non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.10: Discuss why the Taylor approximation is ineffective for certain types of securities.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.11: Explain the differences between the delta-normal and full-revaluation methods for measuring the risk
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.12: Describe the structured Monte Carlo approach to measuring VAR, and identify the advantages and disadvantages of the SMC approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.13: Discuss the implications of correlation breakdown for scenario analysis.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.14: Describe the primary approaches to stress testing and the advantages and disadvantages of each approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.15: Describe the worst case scenario measure as an extension to VAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.1: Calculate cash flow at risk for a firm with normally distributed cash flows for any period, given the expected return and volatility of firm value, and interpret the CFAR measure.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.2: Describe the characteristics of firms for which either VAR or CFAR is the more appropriate measure of risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.3: Given the cost per dollar of VAR and the relevant betas, expected returns, and correlations, calculate the VAR impact and expected net gain of a project/trade that is not large relative to the firm’s portfolio of projects.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.4: Evaluate the impact of a project that is large relative to the firm’s portfolio of projects on CFAR, and explain how the cost of additional CFAR impacts the capital budgeting decision.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.5: Explain how to allocate CFAR and VAR to the existing activities of the firm and how to use these allocations to improve the evaluation of the economic profitability of these activities (projects, divisions, and trading).
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.6: Discuss how a firm can reduce the cost of VAR/CFAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.7: Explain the limitations on project selection and the use of derivative instruments as ways to decrease VAR/CFAR.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.1: Explain the difference between local- and full-valuation methods.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.2: Describe how the addition of second-order terms improves the accuracy of estimates for nonlinear relationships.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.3: Compare the delta normal, historical simulation, and Monte Carlo simulation methods, and explain their appropriate uses.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.4: List the advantages and disadvantages of the delta-normal model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.5: List the advantages and disadvantages of the historical simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.6: List the advantages and disadvantages of the Monte Carlo simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.1: Describe the two components of the typical VAR model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.2: Discuss the three qualities of successful futures contracts and why these are desired in the chosen risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.3: Discuss how the residual specific risk is related to the number of risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.4: Explain the three approaches for mapping a portfolio onto the risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.5: Decompose a fixed-income portfolio into positions in the standard instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.6: Calculate the VAR of a fixed-income portfolio using the delta-normal method, given the expected change in portfolio value and the standard deviation.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.7: Explain why the delta-normal method can provide accurate estimates of VAR for many types of financial instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.8: Discuss why caution must be used in applying delta-normal VAR methods to derivatives and options, and describe when this is appropriate.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.9: Explain what is meant by benchmarking a portfolio, and define tracking error.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.1: Discuss the role of stress testing as a complement to the VAR measure, and describe the benefits and drawbacks of stress testing.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.2: Compare and contrast the use of unidimensional and multidimensional scenario analysis.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.3: Compare and contrast the use of prospective scenarios and historical scenarios in multidimensional scenario analysis, and describe the advantages and disadvantages of each.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.4: Discuss an advantage and disadvantage of using the conditional scenario method as a means to generate a prospective scenario.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.5: Discuss possible responses when scenario analysis reveals unacceptably large stress losses.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.1: Define market risk.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.2: Describe five reasons why market risk measurement is important.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.3: List the models being used to calculate market risk exposure.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.4: List the methods the Bank for International Settlement uses to regulate market risks.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.1: Describe the different sources of foreign exchange risk exposure.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.2: Explain the different types of foreign trading activities and the sources of most profits and losses on foreign exchange trading.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.3: Describe foreign exchange exposure resulting from mismatches between foreign financial asset and liability portfolios, and explain how returns and risks of foreign investing can impact returns.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.4: Explain on-balance-sheet hedging.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.5: Explain off-balance-sheet hedging with forwards.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.6: Explain why diversification in multicurrency foreign asset-liability positions could reduce portfolio risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.7: Distinguish among transaction exposure, contractual exposure, and competitive exposure to exchange rate fluctuations.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.8: Explain the interaction of price risk and quantity risk in terms of the additional challenges to hedging using examples of industries where the association between price and quantity of the risky factor is negative and where it is positive.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.9: Explain the implications of perfect positive correlation, zero correlation, and perfect negative correlation between price risk and quantity risk for the optimal hedge ratio and the risk of the hedged versus the unhedged cash flows.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.10: Describe how the exposure of cash flow to a risk factor, such as exchange rate risk, is measured.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.11: Using supply (marginal cost) and demand analysis, illustrate the competitive exposure to exchange rate risk for an exporting firm, considering changes in (i) exchange rates between the firm’s currency and the currency of the importing country and (ii) exchange rates between the currency of a third country (that has exporters that compete with the firm) and the currency of the importing country.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.12: Outline the steps in determining cash flow exposure from a pro forma analysis when the correlation of the quantity sold with the risk factor is zero, positive, and negative.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.13: Explain how the optimal hedge ratio is determined in the context of pro forma cash flow analysis with one risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.14: Illustrate the concept of the delta exposure of cash flow, and describe how it is estimated in practice for non-linear exposure to a risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.15: Describe the steps in using Monte Carlo simulation to estimate the volatility-minimizing hedge ratio and the circumstances under which this approach has significant advantages.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 21.1: Compare and contrast the structure of Treasury coupon bonds and Treasury STRIPS, and differentiate between P-STRIPS and C-STRIPS.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.2: Calculate a bond’s yield to maturity (YTM) using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.3: Calculate the price of an annuity and a perpetuity using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.4: Describe the price of a bond relative to its par value when (i) coupon rate = YTM, (ii) coupon rate > YTM, and (iii) coupon rate < YTM.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.5: Calculate the accrued interest and invoice price on a coupon bond.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.6: Calculate simple, semiannual, monthly, daily, and continuously compounded rates given a discount factor or market interest rate for a specified interval.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 22.1: Generate the discount function given a series of coupon bond prices.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.2: Calculate a series of spot rates given the appropriate discount factors or STRIPS prices.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.3: Calculate forward rates from a series of spot rates.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.4: Calculate the price of a bond using discount factors, spot rates, or forward rates.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.5: Describe the arbitrage trade necessary to exploit violations of the law of one price, and compute the profit or loss of the arbitrage strategy.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.6: Use the discount function to determine whether a bond is trading cheap or rich.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 22.7: Explain the linear yield interpolation and piecewise cubic methods for estimating complete discount functions.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.1: Calculate the dollar value of an 01 (DV01) of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.2: Calculate the face amount of one security required to hedge a position in a second security, given the DV01 of each.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.3: Calculate and interpret the effective duration of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.4: Calculate and interpret the convexity of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.5: Estimate the price change of a security given the DV01, the duration, and the convexity.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.6: Interpret convexity in the contexts of investment management and asset-liability management.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.7: Calculate the duration of a portfolio.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.8: Interpret the impact of changes in maturity, yield, and rating on a bond’s duration.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.9: Define, interpret, and calculate the yield-based DV01, the modified duration, and the Macaulay duration of a security.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.10: Explain how Macaulay duration and DV01 vary with changes in coupon rate, maturity, and yield.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.11: Explain how yield-based convexity changes for changes in maturity.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.12: Describe the construction of a barbell and a bullet portfolio, and compare and contrast the convexity of the two portfolios.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.1: Describe the major weakness attributable to single-factor approaches when hedging portfolios or implementing asset liability techniques.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.2: Define the key rate shift technique in multifactor hedging applications, and discuss four appealing characteristics of this approach.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.3: Calculate the key rate exposures for a given security.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.4: Calculate the appropriate hedging positions required given a specific key rate exposure profile.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.5: Discuss why hedges based on key rates only approximate an immunized position in the underlying assets.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.6: Explain the main differences between using the key rate shift approach and the bucket shift approach for managing interest rate risks.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.7: Explain how key rate and bucket analysis may be applied in estimating portfolio volatility.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.1: Calculate the value of a derivative on a fixed-income security, given an interest rate tree and the risk-neutral probabilities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.2: Discuss the advantages and disadvantages of reducing the size of the time steps.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.3: Explain why the Black-Scholes-Merton model is not appropriate for valuing derivatives on fixed-income securities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.4: Explain the impact of embedded options on a fixed-income security’s price.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.1: Describe the basic features of a fixed rate, level payment mortgage, including the prepayment option.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.2: Discuss the factors that affect mortgage prepayments.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.3: Discuss the advantages and disadvantages of static cash flow models, implied models, and prepayment models.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.4: Describe the characteristics of the price-rate curve of a mortgage pass-through security.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.5: Describe the prepayment risk of planned amortization class (PAC) bonds, support bonds, principal only (PO) strips, and interest only (IO) strips.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.6: Describe the Monte Carlo simulation method for valuing mortgage-backed securities.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.1: State and explain the cost-of-carry model for forward prices using both assets that have interim cash flows and assets that do not have interim cash flows.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.2: Compute the forward price given both the price of the underlying and the appropriate carrying costs of the underlying.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.3: Calculate the value of a forward contract.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.4: Describe the differences between forward and futures contracts.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.5: Distinguish between a long futures position and a short futures position.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.6: Describe the characteristics of a futures contract and explain how futures positions are settled.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.7: Describe the marking-to-market procedure, the initial margin, and the maintenance margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.8: Compute the variation margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.9: Explain the role of the clearinghouse.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.1: Differentiate between a short hedge and a long hedge, and identify situations where each is appropriate.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.2: Define and calculate the basis.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.3: Define the types of basis risk and explain how they arise in futures hedging.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.4: Define, calculate, and interpret the minimum variance hedge ratio.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.5: Calculate the number of stock index futures contracts to buy or sell to hedge an equity portfolio or individual stock.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.6: Identify situations when a rolling hedge is appropriate, and discuss the risks of such a strategy.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.1: Identify and apply the three most common day count conventions.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.2: Explain the U.S. Treasury bond (T-bond) futures contract conversion factor.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.3: Calculate the Eurodollar futures contract convexity adjustment.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.4: Formulate a duration-based hedging strategy using interest rate futures.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.5: Identify the limitations of using a duration-based hedging strategy.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.1: Explain the derivation of the basic equilibrium formula for pricing commodity forwards and futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.2: Define lease rates, and discuss the importance of lease rates for determining no-arbitrage values for commodity futures and forwards.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.3: Explain how lease rates determine whether a forward market is in contango or backwardation.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.4: Explain how storage costs impact commodity forward prices, and calculate the forward price of a commodity with storage costs.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.5: Explain how a convenience yield impacts commodity forward prices, and determine the no-arbitrage bounds for the forward price of a commodity when the commodity has a convenience yield.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.6: Discuss the factors that impact the pricing of gold, corn, natural gas, and oil futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.7: Describe and calculate a commodity spread.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.8: Define basis risk, and explain how basis risk can occur when hedging commodity price exposure.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.9: Differentiate between a strip hedge and a stack hedge.
|
|
Hull, Chapter 7, Swaps
|
LO 31.1: Illustrate the mechanics and compute the cash flows of a plain vanilla interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.2: Explain how an interest rate swap can be combined with an existing asset or liability to transform the interest rate risk.
|
|
Hull, Chapter 7, Swaps
|
LO 31.3: Explain the advantages and disadvantages of the comparative advantage argument often used for the existence of the swap market.
|
|
Hull, Chapter 7, Swaps
|
LO 31.4: Explain how the discount rates in a swap are computed.
|
|
Hull, Chapter 7, Swaps
|
LO 31.5: Explain how a swap can be interpreted as two simultaneous bond positions or as a sequence of forward rate agreements (FRAs).
|
|
Hull, Chapter 7, Swaps
|
LO 31.6: Calculate the value of an interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.7: Explain the mechanics and calculate the value of a currency swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.8: Explain the role of credit risk inherent in an existing swap position.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.1: Explain the specifications of exchange-traded stock options including strike, expiration dates, terminology, dividend and stock split adjustments, and position limits.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.2: Describe a flex option and long-term equity anticipation securities (LEAPS®).
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.3: Explain why margin is required for the writer of options but not for owners of options.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.4: Explain the differences between exchange-traded options and warrants, executive stock options, and convertible bonds.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.1: Identify the six factors that affect an option’s price.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.2: Explain how the six factors affect an option’s price for both European and American options.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.3: Identify upper and lower bounds for option pricing.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.4: Explain put-call parity and use it to compute option values.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.5: Explain the difference between a European and American call on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.6: Contrast and explain the early exercise features of American call and put options on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.7: Explain the relationship between the prices of American call and put options on a nondividend-paying stock within the context of a put-call parity relationship.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.1: Calculate the value of a European call or put option using a one-step and a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.2: Calculate the value of an American call or put option using a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.3: Discuss how the binomial model value converges as time periods are added.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.4: Identify the assumptions underlying the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.5: Compute the value of a European option using the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.6: Discuss how cash flows affect the pricing of an option.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.7: Identify the methods for estimating future volatility.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.1: Explain how put-call parity indicates that the same implied volatility used to price calls is the one used to price puts.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.2: Explain why a volatility smile may exist in foreign currency options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.3: Explain why a volatility smile may exist in equity options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.4: Describe how the volatility term structure and volatility surfaces may be used when pricing options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.5: Describe how the volatility smile affects calculation of option Greeks.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.6: Discuss how the implied volatility of an option might be affected by jumps in asset prices.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.7: Discuss the general empirical testing results of the Black-Scholes-Merton option pricing model.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.1: Illustrate and explain why an investor would write a covered call or a protective put strategy.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.2: Illustrate and explain why an investor would enter into a spread strategy (e.g., bull spread, bear spread, calendar spread, or butterfly spread).
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.3: Illustrate and explain why an investor would enter into a combination strategy (e.g., straddles, strangles, strips, or straps).
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.1: Discuss the risks of naked and covered positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.2: Describe how naked and covered positions can be used to generate a stop-loss trading strategy.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.3: Describe the characteristics of delta hedging for option, forward, and futures contracts, and discuss the dynamic aspects of delta hedging.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.4: Define the delta of a portfolio.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.5: Define and discuss “theta” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.6: Define and discuss “gamma” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.7: Describe how to create and maintain a gamma-neutral position.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.8: Discuss the relationship between delta, theta, and gamma.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.9: Define and discuss “vega” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.10: Define and discuss “rho” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.11: Describe how hedging activities take place in practice, and discuss how scenario analysis can be used to formulate expected gains and losses with option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.12: Define and discuss how portfolio insurance can be created through option instruments and stock index futures.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.1: Define exotic derivatives, and briefly describe the four primary issues to be considered when evaluating alternative approaches to taking a position in exotic derivatives.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.2: Define and illustrate the use of packages in formulating a zero-cost product.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.3: List and describe how various option characteristics can transform standard American options into nonstandard American options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.4: Describe the characteristics of forward start options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.5: Describe how compound options are created.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.6: Discuss the characteristics of a chooser option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.7: Describe the characteristics of barrier options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.8: Describe how binary options generate discontinuous payoff profiles.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.9: Discuss the various factors affecting lookback options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.10: Describe the characteristics of a shout option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.11: Describe an Asian option, and discuss the factors impacting Asian options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.12: Describe the workings of options used to exchange one asset for another.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.13: Define basket options.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.14: Discuss the issues impacting hedging concerns when dealing with exotic options, and explain the use of static option replication in hedging exotic options.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.15: Compare and contrast exchange-traded options, over-the-counter options, dynamic replication, and static replication in regard to their advantages, costs, and risks to the user.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.16: Discuss the various roles that financial intermediaries can take with respect to the derivative products they sell in terms of their risk position and comparative advantage.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.17: Explain how financial engineering and innovation in derivative products can solve risk management problems, and the role of competition in the profitability and availability of new products.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.18: Discuss the reasons that some derivatives are embedded in other securities or bundled with other derivatives.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.19: Given the tradeoffs involved in selecting the optimal derivative instrument or replicating strategy, provide a framework for selecting the optimal instrument or strategy to hedge a particular risk.
|
MarketLO_sortByReading
|
|
|
|
Reading
|
Learning Outcome
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.1: Define market risk.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.2: Describe five reasons why market risk measurement is important.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.3: List the models being used to calculate market risk exposure.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.4: List the methods the Bank for International Settlement uses to regulate market risks.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.1: Describe the different sources of foreign exchange risk exposure.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.2: Explain the different types of foreign trading activities and the sources of most profits and losses on foreign exchange trading.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.3: Describe foreign exchange exposure resulting from mismatches between foreign financial asset and liability portfolios, and explain how returns and risks of foreign investing can impact returns.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.4: Explain on-balance-sheet hedging.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.5: Explain off-balance-sheet hedging with forwards.
|
|
A. Saunders, Fin'l Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.6: Explain why diversification in multicurrency foreign asset-liability positions could reduce portfolio risk.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.1: Illustrate and explain why an investor would write a covered call or a protective put strategy.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.2: Illustrate and explain why an investor would enter into a spread strategy (e.g., bull spread, bear spread, calendar spread, or butterfly spread).
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.3: Illustrate and explain why an investor would enter into a combination strategy (e.g., straddles, strangles, strips, or straps).
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.1: Calculate the value of a European call or put option using a one-step and a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.2: Calculate the value of an American call or put option using a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.3: Discuss how the binomial model value converges as time periods are added.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.4: Identify the assumptions underlying the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.5: Compute the value of a European option using the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.6: Discuss how cash flows affect the pricing of an option.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.7: Identify the methods for estimating future volatility.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.1: Discuss the risks of naked and covered positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.2: Describe how naked and covered positions can be used to generate a stop-loss trading strategy.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.3: Describe the characteristics of delta hedging for option, forward, and futures contracts, and discuss the dynamic aspects of delta hedging.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.4: Define the delta of a portfolio.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.5: Define and discuss “theta” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.6: Define and discuss “gamma” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.7: Describe how to create and maintain a gamma-neutral position.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.8: Discuss the relationship between delta, theta, and gamma.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.9: Define and discuss “vega” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.10: Define and discuss “rho” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.11: Describe how hedging activities take place in practice, and discuss how scenario analysis can be used to formulate expected gains and losses with option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.12: Define and discuss how portfolio insurance can be created through option instruments and stock index futures.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.1: Explain how put-call parity indicates that the same implied volatility used to price calls is the one used to price puts.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.2: Explain why a volatility smile may exist in foreign currency options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.3: Explain why a volatility smile may exist in equity options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.4: Describe how the volatility term structure and volatility surfaces may be used when pricing options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.5: Describe how the volatility smile affects calculation of option Greeks.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.6: Discuss how the implied volatility of an option might be affected by jumps in asset prices.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.7: Discuss the general empirical testing results of the Black-Scholes-Merton option pricing model.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.5: Distinguish between a long futures position and a short futures position.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.6: Describe the characteristics of a futures contract and explain how futures positions are settled.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.7: Describe the marking-to-market procedure, the initial margin, and the maintenance margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.8: Compute the variation margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.9: Explain the role of the clearinghouse.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.1: Define exotic derivatives, and briefly describe the four primary issues to be considered when evaluating alternative approaches to taking a position in exotic derivatives.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.2: Define and illustrate the use of packages in formulating a zero-cost product.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.3: List and describe how various option characteristics can transform standard American options into nonstandard American options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.4: Describe the characteristics of forward start options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.5: Describe how compound options are created.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.6: Discuss the characteristics of a chooser option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.7: Describe the characteristics of barrier options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.8: Describe how binary options generate discontinuous payoff profiles.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.9: Discuss the various factors affecting lookback options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.10: Describe the characteristics of a shout option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.11: Describe an Asian option, and discuss the factors impacting Asian options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.12: Describe the workings of options used to exchange one asset for another.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.13: Define basket options.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.1: Differentiate between a short hedge and a long hedge, and identify situations where each is appropriate.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.2: Define and calculate the basis.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.3: Define the types of basis risk and explain how they arise in futures hedging.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.4: Define, calculate, and interpret the minimum variance hedge ratio.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.5: Calculate the number of stock index futures contracts to buy or sell to hedge an equity portfolio or individual stock.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.6: Identify situations when a rolling hedge is appropriate, and discuss the risks of such a strategy.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.1: State and explain the cost-of-carry model for forward prices using both assets that have interim cash flows and assets that do not have interim cash flows.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.2: Compute the forward price given both the price of the underlying and the appropriate carrying costs of the underlying.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.3: Calculate the value of a forward contract.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.4: Describe the differences between forward and futures contracts.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 22.1: Generate the discount function given a series of coupon bond prices.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.1: Identify and apply the three most common day count conventions.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.2: Explain the U.S. Treasury bond (T-bond) futures contract conversion factor.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.3: Calculate the Eurodollar futures contract convexity adjustment.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.4: Formulate a duration-based hedging strategy using interest rate futures.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.5: Identify the limitations of using a duration-based hedging strategy.
|
|
Hull, Chapter 7, Swaps
|
LO 31.1: Illustrate the mechanics and compute the cash flows of a plain vanilla interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.2: Explain how an interest rate swap can be combined with an existing asset or liability to transform the interest rate risk.
|
|
Hull, Chapter 7, Swaps
|
LO 31.3: Explain the advantages and disadvantages of the comparative advantage argument often used for the existence of the swap market.
|
|
Hull, Chapter 7, Swaps
|
LO 31.4: Explain how the discount rates in a swap are computed.
|
|
Hull, Chapter 7, Swaps
|
LO 31.5: Explain how a swap can be interpreted as two simultaneous bond positions or as a sequence of forward rate agreements (FRAs).
|
|
Hull, Chapter 7, Swaps
|
LO 31.6: Calculate the value of an interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.7: Explain the mechanics and calculate the value of a currency swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.8: Explain the role of credit risk inherent in an existing swap position.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.1: Explain the specifications of exchange-traded stock options including strike, expiration dates, terminology, dividend and stock split adjustments, and position limits.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.2: Describe a flex option and long-term equity anticipation securities (LEAPS®).
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.3: Explain why margin is required for the writer of options but not for owners of options.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.4: Explain the differences between exchange-traded options and warrants, executive stock options, and convertible bonds.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.1: Identify the six factors that affect an option’s price.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.2: Explain how the six factors affect an option’s price for both European and American options.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.3: Identify upper and lower bounds for option pricing.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.4: Explain put-call parity and use it to compute option values.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.5: Explain the difference between a European and American call on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.6: Contrast and explain the early exercise features of American call and put options on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.7: Explain the relationship between the prices of American call and put options on a nondividend-paying stock within the context of a put-call parity relationship.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.1: Discuss reasons for the widespread adoption of VAR as a measure of risk.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.2: Define value at risk and calculate VAR for a single asset on both a dollar and percentage basis.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.3: Convert a daily VAR measure into a weekly, monthly, or annual VAR measure.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.4: Discuss assumptions underlying VAR calculations.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.5: Explain why it is best to use continuously compounded rates of return when calculating VAR.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.6: Calculate portfolio VAR and describe the primary factors that affect portfolio risk.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.7: Differentiate between linear and non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.8: Describe the calculation of VAR for a linear derivative.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.9: Explain how the addition of second-order terms through the Taylor approximation improves the estimate of VAR for non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.10: Discuss why the Taylor approximation is ineffective for certain types of securities.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.11: Explain the differences between the delta-normal and full-revaluation methods for measuring the risk
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.12: Describe the structured Monte Carlo approach to measuring VAR, and identify the advantages and disadvantages of the SMC approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.13: Discuss the implications of correlation breakdown for scenario analysis.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.14: Describe the primary approaches to stress testing and the advantages and disadvantages of each approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.15: Describe the worst case scenario measure as an extension to VAR.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.1: Explain the derivation of the basic equilibrium formula for pricing commodity forwards and futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.2: Define lease rates, and discuss the importance of lease rates for determining no-arbitrage values for commodity futures and forwards.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.3: Explain how lease rates determine whether a forward market is in contango or backwardation.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.4: Explain how storage costs impact commodity forward prices, and calculate the forward price of a commodity with storage costs.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.5: Explain how a convenience yield impacts commodity forward prices, and determine the no-arbitrage bounds for the forward price of a commodity when the commodity has a convenience yield.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.6: Discuss the factors that impact the pricing of gold, corn, natural gas, and oil futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.7: Describe and calculate a commodity spread.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.8: Define basis risk, and explain how basis risk can occur when hedging commodity price exposure.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.9: Differentiate between a strip hedge and a stack hedge.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.1: Explain the difference between local- and full-valuation methods.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.2: Describe how the addition of second-order terms improves the accuracy of estimates for nonlinear relationships.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.3: Compare the delta normal, historical simulation, and Monte Carlo simulation methods, and explain their appropriate uses.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.4: List the advantages and disadvantages of the delta-normal model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.5: List the advantages and disadvantages of the historical simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.6: List the advantages and disadvantages of the Monte Carlo simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.1: Describe the two components of the typical VAR model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.2: Discuss the three qualities of successful futures contracts and why these are desired in the chosen risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.3: Discuss how the residual specific risk is related to the number of risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.4: Explain the three approaches for mapping a portfolio onto the risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.5: Decompose a fixed-income portfolio into positions in the standard instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.6: Calculate the VAR of a fixed-income portfolio using the delta-normal method, given the expected change in portfolio value and the standard deviation.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.7: Explain why the delta-normal method can provide accurate estimates of VAR for many types of financial instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.8: Discuss why caution must be used in applying delta-normal VAR methods to derivatives and options, and describe when this is appropriate.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.9: Explain what is meant by benchmarking a portfolio, and define tracking error.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.1: Discuss the role of stress testing as a complement to the VAR measure, and describe the benefits and drawbacks of stress testing.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.2: Compare and contrast the use of unidimensional and multidimensional scenario analysis.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.3: Compare and contrast the use of prospective scenarios and historical scenarios in multidimensional scenario analysis, and describe the advantages and disadvantages of each.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.4: Discuss an advantage and disadvantage of using the conditional scenario method as a means to generate a prospective scenario.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.5: Discuss possible responses when scenario analysis reveals unacceptably large stress losses.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.14: Discuss the issues impacting hedging concerns when dealing with exotic options, and explain the use of static option replication in hedging exotic options.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.15: Compare and contrast exchange-traded options, over-the-counter options, dynamic replication, and static replication in regard to their advantages, costs, and risks to the user.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.16: Discuss the various roles that financial intermediaries can take with respect to the derivative products they sell in terms of their risk position and comparative advantage.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.17: Explain how financial engineering and innovation in derivative products can solve risk management problems, and the role of competition in the profitability and availability of new products.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.18: Discuss the reasons that some derivatives are embedded in other securities or bundled with other derivatives.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.19: Given the tradeoffs involved in selecting the optimal derivative instrument or replicating strategy, provide a framework for selecting the optimal instrument or strategy to hedge a particular risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.1: Calculate cash flow at risk for a firm with normally distributed cash flows for any period, given the expected return and volatility of firm value, and interpret the CFAR measure.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.2: Describe the characteristics of firms for which either VAR or CFAR is the more appropriate measure of risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.3: Given the cost per dollar of VAR and the relevant betas, expected returns, and correlations, calculate the VAR impact and expected net gain of a project/trade that is not large relative to the firm’s portfolio of projects.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.4: Evaluate the impact of a project that is large relative to the firm’s portfolio of projects on CFAR, and explain how the cost of additional CFAR impacts the capital budgeting decision.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.5: Explain how to allocate CFAR and VAR to the existing activities of the firm and how to use these allocations to improve the evaluation of the economic profitability of these activities (projects, divisions, and trading).
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.6: Discuss how a firm can reduce the cost of VAR/CFAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.7: Explain the limitations on project selection and the use of derivative instruments as ways to decrease VAR/CFAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.7: Distinguish among transaction exposure, contractual exposure, and competitive exposure to exchange rate fluctuations.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.8: Explain the interaction of price risk and quantity risk in terms of the additional challenges to hedging using examples of industries where the association between price and quantity of the risky factor is negative and where it is positive.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.9: Explain the implications of perfect positive correlation, zero correlation, and perfect negative correlation between price risk and quantity risk for the optimal hedge ratio and the risk of the hedged versus the unhedged cash flows.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.10: Describe how the exposure of cash flow to a risk factor, such as exchange rate risk, is measured.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.11: Using supply (marginal cost) and demand analysis, illustrate the competitive exposure to exchange rate risk for an exporting firm, considering changes in (i) exchange rates between the firm’s currency and the currency of the importing country and (ii) exchange rates between the currency of a third country (that has exporters that compete with the firm) and the currency of the importing country.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.12: Outline the steps in determining cash flow exposure from a pro forma analysis when the correlation of the quantity sold with the risk factor is zero, positive, and negative.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.13: Explain how the optimal hedge ratio is determined in the context of pro forma cash flow analysis with one risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.14: Illustrate the concept of the delta exposure of cash flow, and describe how it is estimated in practice for non-linear exposure to a risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.15: Describe the steps in using Monte Carlo simulation to estimate the volatility-minimizing hedge ratio and the circumstances under which this approach has significant advantages.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 21.1: Compare and contrast the structure of Treasury coupon bonds and Treasury STRIPS, and differentiate between P-STRIPS and C-STRIPS.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.5: Describe the arbitrage trade necessary to exploit violations of the law of one price, and compute the profit or loss of the arbitrage strategy.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.6: Use the discount function to determine whether a bond is trading cheap or rich.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.2: Calculate a series of spot rates given the appropriate discount factors or STRIPS prices.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.3: Calculate forward rates from a series of spot rates.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.4: Calculate the price of a bond using discount factors, spot rates, or forward rates.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.1: Describe the basic features of a fixed rate, level payment mortgage, including the prepayment option.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.2: Discuss the factors that affect mortgage prepayments.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.3: Discuss the advantages and disadvantages of static cash flow models, implied models, and prepayment models.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.4: Describe the characteristics of the price-rate curve of a mortgage pass-through security.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.5: Describe the prepayment risk of planned amortization class (PAC) bonds, support bonds, principal only (PO) strips, and interest only (IO) strips.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.6: Describe the Monte Carlo simulation method for valuing mortgage-backed securities.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.2: Calculate a bond’s yield to maturity (YTM) using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.3: Calculate the price of an annuity and a perpetuity using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.4: Describe the price of a bond relative to its par value when (i) coupon rate = YTM, (ii) coupon rate > YTM, and (iii) coupon rate < YTM.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.5: Calculate the accrued interest and invoice price on a coupon bond.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.6: Calculate simple, semiannual, monthly, daily, and continuously compounded rates given a discount factor or market interest rate for a specified interval.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 22.7: Explain the linear yield interpolation and piecewise cubic methods for estimating complete discount functions.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.1: Calculate the dollar value of an 01 (DV01) of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.2: Calculate the face amount of one security required to hedge a position in a second security, given the DV01 of each.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.3: Calculate and interpret the effective duration of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.4: Calculate and interpret the convexity of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.5: Estimate the price change of a security given the DV01, the duration, and the convexity.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.6: Interpret convexity in the contexts of investment management and asset-liability management.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.7: Calculate the duration of a portfolio.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.8: Interpret the impact of changes in maturity, yield, and rating on a bond’s duration.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.9: Define, interpret, and calculate the yield-based DV01, the modified duration, and the Macaulay duration of a security.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.10: Explain how Macaulay duration and DV01 vary with changes in coupon rate, maturity, and yield.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.11: Explain how yield-based convexity changes for changes in maturity.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.12: Describe the construction of a barbell and a bullet portfolio, and compare and contrast the convexity of the two portfolios.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.1: Describe the major weakness attributable to single-factor approaches when hedging portfolios or implementing asset liability techniques.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.2: Define the key rate shift technique in multifactor hedging applications, and discuss four appealing characteristics of this approach.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.3: Calculate the key rate exposures for a given security.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.4: Calculate the appropriate hedging positions required given a specific key rate exposure profile.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.5: Discuss why hedges based on key rates only approximate an immunized position in the underlying assets.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.6: Explain the main differences between using the key rate shift approach and the bucket shift approach for managing interest rate risks.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.7: Explain how key rate and bucket analysis may be applied in estimating portfolio volatility.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.1: Calculate the value of a derivative on a fixed-income security, given an interest rate tree and the risk-neutral probabilities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.2: Discuss the advantages and disadvantages of reducing the size of the time steps.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.3: Explain why the Black-Scholes-Merton model is not appropriate for valuing derivatives on fixed-income securities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.4: Explain the impact of embedded options on a fixed-income security’s price.
|
|