16frm二级2016年notes part ii book4risk management and investment current issues financial markets梦轩考资专业提供CFAFRM全程讲义

II RiskManagementandInvestmentManagement;CurrentIssuesinExam 【梦轩考 专业提供CFAFRM全 +讲【梦轩考 专业提供CFAFRM全 +讲PartIIFRM®eAstheVPofAdvancedDesignationsatKa nSchweser,Iampleasedtohavetheopportunitytohelpyouprepareforthe2016FRM0Exam.GettinganearlystartonyourstudyprogramisimportantforyoutosufficientlyPrepare.,.Practice.,.Perform™onexamday.Proper nningwillallowyoutosetasideenoughtimetomasterthelearningobjectivesinthePartIIcurriculum.Nowthatyou'vereceivedyourSchweserNotes™,here'showtogetStep1:AccessYourOnline mandlogintoyouronlineaccountusingthebuttonlocatedinthetopnavigationbar.Afterloggingin,selecttheappropriatepartandproceedtothedashboardwhereyoucanaccessyouronlineproducts.Step2:CreateaStudyCreateastudynwiththeSchweserStudyCalendar(locatedontheSchweserdashboard).ThenviewtheCandidateResourceLibraryon-demandsforanintroductiontocoreconcepts.Step3:PrepareandReadyourOurclear,concisestudynoteswillhelpyoupreparefortheexam.Attheendofeachreading,youcananswertheConceptCheckerquestionsforbetterunderstandingofthecurriculum.AttendaWeeklyAttendourLiveOnlineWeeklyClassorreviewtheon-demandarchivesasoftenasyoulike.OurexpertfacultywillguideyouthroughtheFRMcurriculumwithastructuredapproachtohelpyoupreparefortheexam.(Seeourinstructionpackagestotheright.Visit mtoorder.)PracticewithSchweserPro™izeyourretentionofimportantconceptsandpracticeansweringexam-stylequestionsintheeroQBankandtakingseveralPracticeExams.UseSchweser'sQuickSheetforcontinuousreviewonthego.mtoStep4:FinalAfewweeksbeforetheexam,makeuseofourOnlineReviewWorkshopPackage.Reviewkeycurriculumconceptsineverytopic,performbyworkingthroughdemonstrationproblems,andpracticeyourexamtechniqueswithour8-hourliveOnlineReviewWorkshop.UseSchweser'sSecretSauce®forconvenientstudyonthego.Step5:AspartofourOnlineReviewWorkshopPackage,takeaSchweserMockExamtoensureyouarereadytoperformontheactualFRMExam.Putyourskillsandknowledgetothetestandgainconfidencebeforetheexam.

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*Dates,times,andinstructorssubjectto【梦轩考 专业提供CFAFRM全 +讲】专业提供FRMFARTIIBooK4:RisKMANAGEMENTANDINVESTMENTMANAGEMENT;CURRENTISSUESINFINANCIALMARKETSRISKMANAGEMENTANDINVESTMENT63:Portfolio65:VaRandRiskBudgetinginInvestment67:PortfolioPerformanceEvaluation68:Illiquid69:Hedge70:PerformingDueDiligenceonSpecificManagersandCURRENTISSUESINFINANCIAL71:ForgingBestPracticesinRisk

11310511972:CaseStudiesonDisruptionsDuringthe 128AFromFederalReserveLendingDuringthe2007-09U.S.FinancialCrisis 74:GlobalFinancialMarketsLiquidity 15375:ReformingLIBORandOtherFinancialMarketBen 17576:CentralCounterparties:AddressingTheirTooImportanttoFail 1 20178:Cybersecurity101:AResourceGuideforBank ©2016n,©2016n,【梦轩考 专业提供CFAFRM全 +讲FRM2016PARTIIBOOK4:RISKMANAGEMENTANDINVESTMENTMANAGEMENT;CURRENTISSUESINFINANCIALMARKETS©2016Ka n,Inc.,d.b.a.Ka nSchweser.Allrights ISBN:978-1-4754-3810-PPN:3200- RequiredDi curyservicesofferedbyKa norisGARP®responsibleforanyfeesorcostsofany orentityprovidinganyservicestoKa Thesematerialsmaynotbecopiedwithoutwrittenpermissionfromtheauthor.Theunauthorizedduplicationofthesenotesisaviolationofglobalcopyrightlaws.Yourassistanceinpursuingpotentialviolatorsofthislawis GARP®.Theinformationcontainedinthesebooksisbasedontheoriginalreadingsandisbelievedtobe ©2016 【梦轩考 专业提供CFAFRM全 +讲READINGASSIGNMENTSANDLEARNINGOBJECTIVESREADINGRichardGrinoldandRonaldKahn,ActivePortfolioManagement:A McGraw-Hill,2000)."PortfolioConstruction,"Chapter (page1) Edition.(NewYork:McGrawHill,2007). "VaRandRiskBudgetinginInvestmentManagement,"Chapter

(page13)(page"RiskMonitoringandPerformanceMeasurement,"Chapter (pageMcGraw-Hill,2013). (pageOxfordUniversityPress,2014)."IlliquidAssets,"Chapter (pageVolume2B(Oxford:Elsevier,2013)."HedgeFunds,"Chapter (page©2016Kan, 】专业提供FRMReadingAssignmentsandLearning"PerformingDueDiligenceonSpecificManagersandFunds,"Chapter(page105)RiskManagement(WorkingPaper#0002,OfficeofFinancialResearch,U.S.DepartmentofTreasury,2012). (page119)TanjuYorulmazer,"CaseStudiesonDisruptionsDuringtheCrisis,"FRBNYEconomicReview,2014. (page"WhyDoWeNeedBothLiquidityRegulationsandaLenderofLastResort?AFederalReserveBoard,February2015. (page139) (page153)DarrellDuffieandJeremyC.Stein,"ReformingLIBORandOtherFinancialMarketBen(page175)FroukelienWendt,"CentralCounterparties:AddressingtheirTooImportanttoFailNature"(Workingpaper,InternationalMonetaryFund,2015). (page1GermanGutierrezGallardo,TilSchuermann,andMichaelDuane,"StressTestingConvergence,"2015. "Cybersecurity101:AResourceGuideforBankExecutives,"ConferenceofStateBankingSupervisors,December2014. (page208) ©2016 n,【梦轩考 专业提供CFAFRM全 +讲ReadingAssignmentsandLearningLEARNINGAftercompletingthisreading,youshouldbeableDistinguishamongtheinputstotheportfolioconstructionprocess.(pageprocess.(page1)Describeneutralizationandmethodsforrefiningalphastobeneutral.(pageDescribetheimplicationsoftransactioncostsonportfolioconstruction.(pageofriskaversion,incorporationofspecificriskaversion,andproperalphacoverage.alpha,risk,transactioncostsandtimehorizon.(page5)(page5)Describedispersion,ex ofdispersion.(page7)Portfolio Aftercompletingthisreading,youshouldbeableDefine,calculate,anddistinguishbetweenthefollowingportfolioVaRmeasures:portfolioVaR,anddiversifiedportfolioVaR.(page13)(page18)(page22) aportfolio.(page22) Aftercompletingthisreading,youshouldbeableDefineriskbudgeting.(pageDescribetheinvestmentprocessoflargeinvestorssuchaspensionfunds.(pagefunds.(page32)Distinguishamongthefollowingtypesofrisk:absoluterisk,relative mixrisk,activemanagementrisk,fundingriskandsponsorrisk.(pageofrisk.(page35)©2016 n, 】专业提供FRMReadingAssignmentsandLearningExinhowVaRcanbeusedintheinvestmentprocessandthedevelopmentofinvestmentguidelines.(page37)Describetheriskbudgetingprocessandcalculateriskbudgetsacrossassetclassesandactivemanagers.(page38)RiskMonitoringandPerformanceAftercompletingthisreading,youshouldbeableDefine,compare,andcontrastVaRandtrackingerrorasriskmeasures.(pageDescriberisknning,includingitsobjectives,effectsandtheparticipantsinitsdevelopment.(page47)Describeriskbudgetingandtheroleoftativemethodsinriskbudgeting.(page48)Describeriskmonitoringanditsroleinaninternalcontrolenvironment.(pageIdentifysourcesofriskconsciousnesswithinanorganization.(pageDescribetheobjectivesandactionsofariskmanagementunitinaninvestmentmanagementfirm.(page49)Describehowriskmonitoringcanconfirmthatinvestmentactivitiesareconsistentwithexpectations.(page50)Exintheimportanceofliquidityconsiderationsforaportfolio.(pageDescribetheuseofalpha,ben ark,andpeergroupasinputsinperformancemeasurementtools.(page52)Describetheobjectivesofperformancemeasurement.(page51)Aftercompletingthisreading,youshouldbeableDifferentiatebetweentime-weightedanddollar-weightedreturnsofaportfolioanddescribetheirappropriateuses.(page57)Describeanddistinguishbetweenrisk-adjustedperformancemeasures,suchasSharpe'smeasure,Treynor'smeasure,Jensen'smeasureQensen'salpha),andinformationratio.(page60)DescribetheusesfortheModigliani-squaredandTreynor'smeasureincomparingtwoportfolios,andthegraphicalrepresentationofthesemeasures.(page60)Determinethestatisticalsignificanceofaperformancemeasureusingstandarderrorandthet-statistic.(page67)Exinthedifficultiesinmeasuringtheperformanceofhedgefunds.(pageExinhowchangesinportfoliorisklevelscanaffecttheuseoftheSharperatiotomeasureperformance.(page68)Describetechniquestomeasurethemarkettimingabilityoffundmanagerswitharegressionandwithacalloptionmodel,andcomputereturnduetomarkettiming.(page69)Describestyleysis.(page71)Describeandapplyperformanceattributionprocedures,includingtheassetallocationdecision,sectorandsecurityselectiondecisionandtheaggregatecontribution.(page71)Aftercompletingthisreading,youshouldbeableEvaluatethecharacteristicsofilliquidmarkets.(pageExaminetherelationshipbetweenmarketimperfectionsandilliquidity.(pageAssesstheimpactofbiasesonreportedreturnsforilliquidassets.(page81) ©2016 n,【梦轩考 专业提供CFAFRM全 +讲ReadingAssignmentsandLearningCompareilliquidityriskpremiumsacrossandwithinassetcategories.(pageEvaluateportfoliochoicedecisionsontheinclusionofilliquidassets.(pageAftercompletingthisreading,youshouldbeableDescribethecharacteristicsofhedgefundsandthehedgefundindustry,andcomparehedgefundswithmutualfunds.(page93) inbiaseswhicharecommonlyfoundindatabasesofhedgefunds.(page intheevolutionofthehedgefundindustryanddescribelandmarkeventswhichprecipitatedmajorchangesinthedevelopmentoftheindustry.(page93)Evaluatetheroleofinvestorsin thehedgefundindustry.(page intherelationshipbetweenriskandalphainhedgefunds.(pageCompareandcontrastthedifferenthedgefundstrategies,describetheirreturncharacteristics,anddescribetheinherentrisksofeachstrategy.(page95)Describethehistoricalportfolioconstructionandperformancetrendofhedgefundscomparedtoequityindices.(page98)Describemarketeventswhichresultedinaconvergenceofriskfactorsforhedgefundstrategies,andex intheimpactofsuchaconvergenceonportfoliodiversificationstrategies.(page99)Describetheproblemofrisksharingasymmetrybetweenprincipalsandagentsinthehedgefundindustry.(page99) intheimpactofinstitutionalinvestorsonthehedgefundindustryandassessreasonsforthegrowingconcentrationofassetsundermanagement(AUM)intheindustry.(page100)Aftercompletingthisreading,youshouldbeableIdentifyreasonsforthefailuresoffundsinthepast.(page105) inelementsoftheduediligenceprocessusedtoassessinvestmentmanagers.(page106)Identifythemesandquestionsinvestorscanconsiderwhenevaluatingamanager.(page107)Describecriteriathatcanbeevaluatedinassessingafund'sriskmanagementprocess.(page109) inhowduediligencecanbeperformedonafund'soperationalenvironment.(page110) inhowafund'sbusinessmodelriskanditsfraudriskcanbeassessed.(page112)Describeelementsthatcanbeincludedaspartofaduediligencequestionnaire.(page113)Aftercompletingthisreading,youshouldbeableIdentifytheareasofriskmanagementthathavebeenmostaffectedbytherecentfinancialcrisisanddescribethemajortrendsanddevelopmentsbroughtonbythecrisis.(page119)Evaluatethepresenceofvolatilityregimesinmarketdata.(page121) yzetheimplicationsofmultiplefirmsattemptingtotakethesamerisk-mitigatingsteps.(page122)©2016Kan, 】专业提供FRMReadingAssignmentsandLearningDescribetheimplicationsofrisk-mitigationstrategiesemployedbyfirmsandhowtheycanamplifyrisk.(page122)Exinpracticestoaddressandalleviateamplifiedrisk.(page123)CaseStudiesonDisruptionsDuringtheAftercompletingthisreading,youshouldbeableUnderstandtheuseandpurposeoffundingmechanismsanddescribethedistressinthemarketsduringtherecentcreditcrisis.(page128)DistinguishbetweenCommercialPaperandAsset-BackedCommercialPaperdescribetheresponsestorecentmarketcollapses.(page129)Compareandcontrastsourcesofdisruptioninthemoneymarketmutualfunds,repomarkets,andcreditcommitments.(page131)Evaluatetheimplicationsofthedollarfundingmodelofnon-U.S.banksduringrecentcrisis.(page133)Aftercompletingthisreading,youshouldbeableComparetheadvantagesanddisadvantagesofliquidityregulationsandalenderoflastresortinmanagingliquidityandsystemicriskduringafinancialcrisis,andidentifysituationswhereeachismoreeffective.(page140)Exinhowtheexistenceofalenderoflastresortcancreatemoralhazard.(page143)Describesituationswhereacentralbankshouldbeginlendingtobanksliquiditybuffersareexhausted.(pageDescribechallengesandconstraintstoacentralbankactingasalenderoflastresort.(page144)yzetheFederalReserve'slendingpoliciesandlendingdecisionsduring2007-2009financialcrisis,anddescribetheeffectivenessofeach.(pageExinhowacombinationofliquidityregulationsandlenderoflastresortcanleadtoanoptimalmixtomanagesystemicriskduringfinancialdownturns.(page147)Aftercompletingthisreading,youshouldbeableDefineliquidityanddescribethedimensionsbywhichliquiditycanbemeasured.(page153)Exinhowliquidityisprovidedindifferentfinancialmarkets,includingtheroleofmarketmakersandtheeconomicsofmarketmaking.(page155)Describecurrentglobaltrendsandfactorswhichhaveimpactedliquidityinfinancialmarketsandexintheirliquidityimpact.(page156)Summarizetrendsoverthepast10yearsinthevolumeandliquidityofthefollowingfinancialmarkets:interestratesandinterestratederivatives,sovereignbonds,repos,corporatebonds,CDS,securitizedproducts,foreignexchange,equities,andemergingmarketfinancialproducts.(page158)Aftercompletingthisreading,youshouldbeableDiscussthe mendedprinciplestomakeben arkratessuchasLIBORandotherinterbankofferedrateslesssusceptibletomanipulation.(page175) ©2016 n,【梦轩考 专业提供CFAFRM全 +讲ReadingAssignmentsandLearningEvaluatetheimplications,advantages,anddisadvantagesofusingben (page176)Assessthetypesofagglomerationeffectsafteraben arkhasbeenestablished.(page177) inthemotivesformanipulatingben arksanddescribetheprocessestoalleviatemanipulation.(page178)DescribehowtheUSdollarLIBORisusedandidentifythecostsassociatedwiththeincreaseintradingofLIBOR-linkedcontracts.(page179) inandassesssomeproposedmethodologiestoreformLIBOR.(pageAftercompletingthisreading,youshouldbeableDescribethebenefitsofcentralcounterparties( s)andthepotentialriskswhichcanarisewhenclearingthrougha .(page188) intheinterconnectionsbetweencentralcounterpartiesandotherfinancialinstitutions,includingbanks,clearingmembers,financialmarkets,andother (page190) inhowthefailureofa canspreadsystemicrisktootherfinancialmarketsorinstitutions.(page192) measuresdesignedtoreducetheprobabilityorimpactofpotentialfailures,anddescribelimitationstothesemeasures.(page194) inmeasureswhichcanbeadoptedtomitigatesystemicrisksrelatedtointerconnectionsandinterdependenceof s.(page195)Aftercompletingthisreading,youshouldbeable inhowtrendsinstresstestingandcapitalmanagementhaveevolved2009SCAPtothe2015CCAR.(page201)ComparetrendsincapitalmanagementapproachesbydifferentclassesofCCARinstitutionsfrom2012to2015,andex inthemotivationsforeachclassofinstitutionstoadopttheirapproach.(page202)Identifyanddescribefactorsthathaveencouragedbankstomanagecapitalmorecloselytoregulatoryminimumlevels.(page203)DescribepotentialconsequencesasstresstestresultsfromdifferentbankshaveappearedtoconvergeandmoreinstitutionsbegintomanagecapitaltoFed-projectedresults.(page204)Cybersecurity101:AResourceGuideforBankAftercompletingthisreading,youshouldbeableIdentifythefivecorefunctionsoftheNIST'sCybersecurityFramework.(page intheriskassessmentprocesstoidentifythreatstoinformationorinformationsystems.(page208)Describevariousmeasurestoprotectbanks'systems,assets,anddata.(page211)Describetheapproachestodetectsystemintrusions,databreaches,andunauthorizedaccess.(page214) in nandthe n.(page21©2016 n, 【梦轩考 专业提供CFAFRM全 +讲【梦轩考 专业提供CFAFRM全 +讲 EXAMThistopicaddressestechniquesforoptimalportfolioconstruction.Wewilldiscussimportantinputsintotheportfolioconstructionprocessaswellaswaystomodifyallocationsbyrefiningthepositionalphaswithinaportfolio.Thistopicalsogoesintodetailregardingtransactionscostsandhowtheyinfluenceallocationdecisionswithregardtoportfoliomonitoringandrebalancing.Fortheexam,payattentiontothediscussionsofrefiningalphaandtheimplicationsoftransactionscosts.Also,befamiliarwiththedifferenttechniquesusedtoconstructoptimalportfolios.LO63.1:DistinguishamongtheinputstotheportfolioconstructionTheprocessofconstructinganinvestmentportfoliohasseveralinputswhichinputs,thecurrentportfolioinputcanbemeasuredwiththemostcertainty.resultissometimesunreasonable.Covariances:Covariancemeasureshowthereturnsoftheassetsintheportfolioarerelated.Estimatesofcovarianceoftendis yelementsofuncertainty. Transacrionscosts:Likecovariance,transactioncostsareanimportantinputforportfolioconstruction,however,thesecostsalsocontainadegreeofuncertainty.Transactioncostsmustbeamortizedovertheinvestmenthorizoninordertodeterminetheoptimalportfolioadjustments.Activeriskaversion:Thisinputmustbeconsistentwiththespecifiedtargetactivelevel.Activeriskisanothernamefortrackingerror,whichisthestandarddeviationofactivereturn(i.e.,excessreturn).REFININGLO63.2:Evaluatethemethodsandmotivationforrefiningalphasintheimplementationprocess.Themotivationforrefiningalphaistoaddressthevariousconstraintsthateachinvestorormanagermighthave.Fortheinvestor,constraintsmightincludenothavinganyshortpositionsand/orarestrictionontheamountofcashheldwithintheportfolio.Forthemanager,theconstraintsmightincluderestrictionsonallocationstocertainstocksand/ormakingtheportfolioneutralacrosssectors.Theresultingportfoliowillbe©2016Kan, 【梦轩考 专业提供CFAFRM全 +讲fromacorrespondingunconstrainedportfolioandasaresultwilllikelybelessefficient.ConstrainedoptimizationmethodsforportfolioconstructionareoftencumbersometoAmethodthatinvolvesrefiningthealphascanderivetheoptimalportfolio,giventheconsiderationofportfolioconstraints,inalesscomplicatedmanner.Thismethodrefinestheoptimalpositionalphasandthenadjustseachposition'sallocation.Inotherwords,ifnoshortsalesareallowed,thenthemodifiedalphaswouldbedrawnclosertozero,andtheoptimizationthatwouldfollowwouldcallforazeropercentallocationtothoseshortpositions.If,inadditiontoshortsales,alllongpositionallocationswererequiredtomorecloselyresembletheben arkweights,thenallmodifiedalphaswouldbepulledclosertozerorelativetotheoriginalalphas,indicatingthattheconstrainedportfoliowouldmorecloselyresembletheben arkportfolio(i.e.,sincealphaisclosertozero,thereturnsbetweentheben arkandportfolioarenowcloser).Themainideatothisapproachisthatrefiningalphasandthenoptimizingpositionallocationscanre ceeventhemostsophisticatedportfolioconstructionprocess.Amanagercanrefinethealphasbyproceduresknownasscalingandtrimming.Byconsideringthestructureofalpha,wecanunderstandhowtousethetechniqueofscaling.alpha=(volatility)x(informationcoefficient)xInthisequation,scorehasameanofzeroandstandarddeviationofone.Thismeansthatalphaswillhaveameanzeroandarangethatisdeterminedbythevolatility(i.e.,residualrisk)andtheinformationcoefficient(i.e.,correlationbetweenactualandforecastedes).Themanagercanrescalethealphastomakethemhavetheproperscalefortheportfolioconstructionprocess.Forexample,iftheoriginalalphashadastandarddeviationof2oo,therescaledalphascouldhavealowerstandarddeviationof0.5o.Trimmingextremevaluesisanothermethodofrefiningalpha.Themanagershouldscrutinizealphasthatarelargeinabsolutevalueterms."Large"mightbedefinedasthreetimesthescaleofthealphas.Itmaybethecasethatsuchalphasaretheresultofquestionabledata,andtheweightsforthosepositionallocationsshouldbesettozero.Thoseextremealphasthatappeargenuinemaybekeptbutloweredtobewithinsomelimit,say,threetimesthescale. LO63.3:DescribeneutralizationandmethodsforrefiningalphastobeNeutralizationistheprocessofremovingbiasesandundesirablebetsfromalpha.Thereareseveraltypesofneutralization:ben ark,cash,andrisk-factor.Inallcases,thetypeofneutralizationandthestrategyfortheprocessshouldbespecifiedbeforetheprocessbegins. arkneutralizationinvolvesadjustingtheben arkalphatozero.Thismeanstheoptimalpositionthatusestheben arkwillhaveabetaofone.Thisensuresthatthealphasareben ark-neutralandavoidsanyissueswithben arktiming.Forexample,supposethatamodifiedalphahasabetaof1.2.Bymakingthisalphaben ark-neutral,anewmodifiedalphawillbecomputedwherethebetaisreducedtoone.Makingthealphas ©2016Kan,【梦轩考 专业提供CFAFRM全 +讲CrossReferencetoGARPAssignedReading-GrinoldandKahn,Chapter14cash-neutralinvolvesadjustingthealphassothatthecashpositionwillnotbeactive.Itispossibletosimultaneouslymakealphasbothcashandben Therisk-factorapproachseparatesreturnsalongseveraldimensions(e.g.,industry).Themanagercanidentifyeachdimensionasasourceofeitherriskorvalueadded.Themanagershouldneutralizethedimensionsorfactorsthatareasourceofrisk(forwhichthemanagerdoesnothaveadequateknowledge).TRANSACTIONSLO63.4:DescribetheimplicationsoftransactioncostsonportfolioTransactionscostsarethecostsofmovingfromoneportfolioallocationtoanother.Theyneedtobeconsideredinadditiontothealphaandactiveriskinputsintheoptimizationprocess.Whenconsideringonlyalphaandactiverisk,anyprobleminsettingthescaleofthealphascanbeoffsetbyadjustingactiveriskaversion.Theintroductionoftransactionscostsincreasestheimportanceoftheprecisionofthechoiceofscale.Someresearchersproposethattheaccuracyofestimatesoftransactionscostsisasimportantastheaccuracyofalphaestimates.Furthermore,theexistenceoftransactionscostsincreasestheimportanceofhavingmoreaccurateestimatesofalpha.Whenconsideringtransactionscosts,itisimportanttorealizethatthesecostsgenerallyoccuratapointintimewhilethebenefits(i.e.,theadditionalreturn)arerealizedoveratimeperiod.Thismeansthatthemanagerneedstohavearuleconcerninghowtoamortizethetransactionscostsoveragivenperiod.Beyondtheimplicationsoftransactionscosts,a ysiswouldalsoconsiderthecausesoftransactionscosts,howtomeasurethem,andhowtoavoidthem.Toillustratetheroleoftransactionscostsandhowtoamortizethem,wewillforecastscanbemadewithcertaintyandtherisk- rateiszero.Thecostofbuyingandsellingstockis$0.05.ThecurrentpricesofstockAandBareboth$10.TheforecastsareforthepriceofstockAtobe$11inoneyearandthepriceofstockBtobe$12intwoyears;therefore,theannualizedalphasarethesameat1Ooo.Also,neitherstockwillchangeinvalueafterreachingtheforecastedvalue.Now,assumeineachsuccessiveyearthatthemanagerdiscoversastockwiththesamepropertiesasstockAandeverytwoyearsastockexactlylikestockB.Themanagerwouldtradethestock-Atypestockseachyearandincur$0.10intransactionscostsattheendofeachyear.Thealphais1Ooo,andthetransactionscostsare1o/ofortype-Astocksforanetreturnof9oo.Forthetype-Bstocks,theannualreturnisalso10o,butthetransactionscostsperyearareonlyO.Sobecausetheyareincurredeveryotheryear.Thus,onanannualizedbasis,theafter-cost-returnoftype-Bstocksisgreaterthanthatoftype-A©2016Kan, 【梦轩考 专业提供CFAFRM全 +讲TopicPORTFOLIOCONSTRUCTIONLO63.5:Assesstheimpactofpracticalissuesinportfolioconstructionsuchasdeterminationofriskaversion,incorporationofspecificriskaversion,andproperalphacoverage.Practicalissuesinportfolioconstructionincludethelevelofriskaversion,theoptimalrisk,andthealphacoverage.Measuringthelevelofriskaversionisdependentonaccuratemeasuresoftheinputsinthefollowingexpression:riskaversion

information2xactiveForexample,assumingthattheinformationratiois0.8andthedesiredlevelofactiveriskis1Ooo,thentheimpliedlevelofriskaversionis0.04.Beingableto fyriskaversionallowsthemanagertounderstanda 'sutilityinamean-varianceframework.Utilitycanbemeasuredas:excessreturn-(riskaversionx0.1O).Aversiontospecificfactorriskisimportantfortworeasons.Itcanhelpthemanageraddresstherisksassociatedwithhavingapositionwiththepotentialforhugelosses,andthepotentialdispersionacrossportfolioswhenthemanagermanagesmorethanoneportfolio.Thisapproachcanhelpamanagerdecidetheappropriateaversiontocommonandspecificriskfactors.Properalphacoveragereferstoaddressingthecasewherethemanagerhasforecastsofstocksthatarenotintheben arkandthemanagerdoesn'thaveforecastsforassetsintheben ark.Whenthemanagerhasinformationonstocksnotintheben ark,a arkweightofzeroshouldbeassignedwithrespecttoben arking,butactiveweightscanbeassignedtogenerateactivealpha.Whenthereisnotaforecastforassetsintheben ark,alphascanbeinferredfromthealphasofassetsforwhichthereareforecasts.Oneapproachistofirstcomputethefollowingtwomeasures:value-weightedfractionofstockswithforecasts=sumofactiveholdingswith

(weightedaverageofthealphaswith

e

=(value-weightedfractionofstockswith ©2016Kan,【梦轩考 专业提供CFAFRM全 +讲CrossReferencetoGARPAssignedReading-GrinoldandKahn,Chapter14Thesecondstepistosubtractthismeasurefromeachalphaforwhichthereisaforecastandsetalphatozeroforassetsthatdonothaveforecasts.Thisprovidesasetofben neutralforecastswhereassetswithoutforecastshaveanalphaofzero.PORTFOLIOREVISIONSAND LO63.6:Describeportfoliorevisionsandrebalancingandevaluatethetradeoffsbetweenalpha,risk,transactioncostsandtimehorizon.LO63.7:Determinetheoptimalno-traderegionforrebalancingwithtransactionIftransactionscostsarezero,amanagershouldreviseaportfolioeverytimenewinformationarrives.However,inapracticalsetting,themanagershouldmaketradingdecisionsbasedonexpectedactivereturn,activerisk,andtransactionscosts.Themanagermaywishtobeconservativeduetotheuncertaintiesofthesemeasuresandthemanager'sabilitytointerpretthem.Underestimatingtransactionscosts,forexample,willleadtotradingtoofrequently.Inaddition,thefrequenttradingandshorttime-horizonswouldcausealphaestimatestoexhibitagreatdealofuncertainty.Therefore,themanagermustchooseanoptimaltimehorizonwherethecertaintyofthealphaissufficienttojustifyatradegiventhetransactionscosts.Therebalancingdecisiondependsonthetradeoffbetweentransactionscostsandthevalueaddedfromchangingtheposition.Portfoliomanagersmustbeawareoftheexistenceo