文本教程成果v1 financial english for cfa candidates

FinancialEnglishforFinancialEnglishforCFAHenrySeniorCFAinstructor,GoldenHOWTOHOWTODECODEAWITHOUT2-AnexcerptfromAnexcerptfromThefeaturesofafixed-incomesecurityincludespecificationof:TheissueroftheThematuritydateoftheTheparCouponrateandCurrencyinwhichpaymentswillbe3-AnexcerptfromIssuersAnexcerptfromIssuersofThereareseveraltypesofentitiesthatissuebondswhentheyborrowmoney,including:Corporations,Sovereignnationalgovernments,Nonsovereign…Quasi-governmententities.Notadirectobligationofacountry’sgovernmentorcentralbank.AnexampleistheFederalNationalMortgageAssociation(FannieMae)…Supranationalentities.IssuedbyorganizationsthatoperategloballysuchastheWorldBank,theEuropeanInvestmentBank,andtheInternationalMonetaryFund(IMF).4-AnexcerptfromBondAnexcerptfromBondThematuritydateofabondisthedateonwhichtheprincipalistoberepaid.Onceabondhasbeenissued,thetimeremaininguntilmaturityisreferredtoasthetermtomaturityortenorofa5-AnexcerptfromParAnexcerptfromParTheparvalueofabondistheprincipalamountthatwillberepaidatmaturity.Theparvalueisalsoreferredtoasthefacevalue,maturityvalue,redemptionvalue,orprincipalvalueofabond.Bondscanhaveaparvalueofanyamount,andtheirpricesarequotedasapercentageofpar.Abondwithaparvalueof$1,000quotedat98issellingfor6-AnexcerptfromCouponTheAnexcerptfromCouponThecouponrateonabondistheannualpercentageofitsparvaluethatwillbepaidtobondholders.Somebondsmakecouponinterestpaymentsannually,whileothersmakesemiannual,quarterly,ormonthlypayments.A$1,000parvaluesemiannual-paybondwitha5%couponwouldpay2.5%of$1,000,or$25,everysixmonths.Abondwithafixedcouponrateiscalledplainvanillabondoraconventional7-AnexcerptfromSomebondspaynointerestpriortomaturityandarecalledzero-couponbondsorpurediscountbonds.AnexcerptfromSomebondspaynointerestpriortomaturityandarecalledzero-couponbondsorpurediscountbonds.Purediscountreferstothefactthatthesebondsaresoldatadiscounttotheirparvalueandtheinterestisallpaidatmaturitywhenbondholdersreceivetheparvalue.A10-year,$1,000,zero-couponbondyielding7%wouldsellatabout$500initiallyandpay$1,000atmaturity.Wediscussvariousothercouponstructureslaterinthistopic8-AnexcerptfromPrice=CCCC01234AnexcerptfromPrice=CCCC012345termtomaturity=9-AnexcerptfromAnoptioncontractgivesitsownertheright,butnotthelegalobligation,toconductatransactioninvolvinganunderlyingassetAnexcerptfromAnoptioncontractgivesitsownertheright,butnotthelegalobligation,toconductatransactioninvolvinganunderlyingassetatapredeterminedfuturedate(theexercisedate)andatapredeterminedprice(theexercisepriceorstrikeprice).Optionsgivetheoptionbuyertherighttodecidewhetherornotthetradewilleventuallytakeplace.Theselleroftheoptionhastheobligationtoperformifthebuyerexercisesthe10-AnexcerptfromTheownerofacalloptionhastherighttopurchaseAnexcerptfromTheownerofacalloptionhastherighttopurchasetheunderlyingassetataspecificpriceforaspecifiedtimeperiod.Theownerofaputoptionhastherighttoselltheunderlyingassetataspecificpriceforaspecifiedtime11-AnexcerptfromForeveryownerAnexcerptfromForeveryownerofanoption,theremustbeaseller.Theselleroftheoptionisalsocalledtheoptionwriter.Therearefourpossibleoptionspositions:Longcall:thebuyerofacalloption-hastherighttobuyanunderlyingasset.Shortcall:thewriter(seller)ofacalloption-hastheobligationtoselltheunderlyingasset.Longput:thebuyerofaputoption-hastherighttoselltheunderlyingasset.Shortput:thewriter(seller)ofaputoption-hastheobligationtobuytheunderlyingasset.12-AnexcerptfromAnexcerptfromToacquiretheserights,ownersofoptionsmustbuythembypayingapricecalledtheoptionpremiumtothesellerofthe13-Anexcerptfrom14-BuyeroftheAnexcerptfrom14-BuyeroftheoptionRighttobuyassetPaythepremiumBuyeroftheoptionRighttosellassetPaythepremiumSelleroftheoptionObligationtosellassetReceivethepremiumSelleroftheoptionObligationtobuyassetReceivethepremiumHOWTOHOWTOPARSEALONGSOPHISTICATED15-Anexcerptfrompastexam•AportfoliomanagerAnexcerptfrompastexam•AportfoliomanagerjustobservedtheannouncementofanincreaseinthetargetfederalfundsratefromtheUSFederalOpenMarketCommitteeandnoticesthathousing-relatedstockpositionsintheportfolioarequicklylosingvalue.Thetraderwouldthereforeliketoreducethesepositionsimmediatelytotrytopreventmoreextremelosses.WhichofthefollowingordertypeswouldbebestfortheportfoliomanagertoLimitMarketorder16-Anexcerptfrompastexam•GardnerKnight,CFA,isAnexcerptfrompastexam•GardnerKnight,CFA,isaproductdevelopmentspecialistataninvestmentbank.Knightisresponsibleforcreatingandmarketingcollateralizeddebtobligations(CDOs)consistingofresidentialmortgagebonds.InthemarketingbrochureforhismostrecentCDO,KnightprovidedalistofthemortgagebondsthattheCDOwascreatedfrom.Thebrochurealsostates“anindependentthirdparty,thecollateralmanager,hadsoleauthorityovertheselectionofallmortgagebondsusedascollateralintheCDO.”However,KnightmetwiththecollateralmanagerandhelpedherselectthebondsfortheCDO.KnightisleastlikelytobeinviolationofwhichofthefollowingCFAInstituteStandardsofProfessionalClient17-Anexcerptfrompastexam•Anexcerptfrompastexam•ZhaoXuan,CFA,isasellsideinvestmentanalyst.Whileatasoftwareindustryconference,ZhaohearsrumorsthatGreenRunSoftwaremayhavefalsifieditsfinancialresults.Whenshereturnstoheroffice,ZhaoconductsathoroughanalysisofGreenRun.Basedonherresearch,includingdiscussionswithsomeofGreenRun’scustomers,ZhaoisconvincedthatGreenRun’sreported50%increaseinnetincomeduringrecentquartersiscompletelyfictitious.Sofar,however,ZhaoistheonlyanalystsuspiciousaboutGreenRun’sreportedearnings.AccordingtotheCFAInstituteCodeofEthicsandStandardsofProfessionalConduct,theleastappropriateactionforZhaoisreporthersuspicionstoGreenRun’smanagement.donothing,untilotheranalystssupportheranalysis.recommendherclientsselltheirGreenRunshares18-Anexcerptfrompastexam•Atthestartoftheyear,acompany’scapitalcontributedbyownersandretainedAnexcerptfrompastexam•Atthestartoftheyear,acompany’scapitalcontributedbyownersandretainedearningsaccountshadbalancesof$10,000andrespectively.Duringtheyear,thefollowingeventstook•Theendofyearowners’equityisclosest19-Anexcerptfrompastexam•AnorganizationcangainanadvantageAnexcerptfrompastexam•Anorganizationcangainanadvantageovercompetingfirmsbyprudentriskmanagementpractices.OneexampleofthiswouldEliminating,asmuchaspossible,qualitativemethodsforassessingrisksinfavorofquantitativemethods.Compensatingrisk-takingemployeesprimarilywithstockoptiongrantsinordertobetteraligntheirinterestswiththoseofthefirm.Encouragingtheindependentoperationandoversightofrisk-takingfunctionswithinthefirmtogainthe“benefitsofPreservingdebtcapacitybyissuinglessdebtthanthefirm20-Anexcerptfrompastexam•WhenhelpingtodecideAnexcerptfrompastexam•Whenhelpingtodecidewhichfinancialproducttouseforagivenwhichofthefollowingstatementsaboutfuturesandforwardswouldariskmanagerconsidercorrect?Deliverydatesonfuturesandforwardcontractsarenotspecifiedattheonsetofthecontract.ForwardscarrylesscreditriskthanMaturingcommodityfuturesmaynotdictatedeliveryofagreatervolumeoftheunderlyingassetthanwhatisphysicallyavailable.Futuresandforwardscanbothbesubjecttothepostingofcollateralbasedondailyvaluation.21-Anexcerptfrompastexam•LIBORshouldbeAnexcerptfrompastexam•LIBORshouldbefullyunderstoodbeforeusingitasareferencerateforriskmanagementcalculations.WhichofthefollowingstatementsregardingLIBORisLIBORisquotedinGBP,EUR,USD,andothermajorLIBORismorerepresentativeofarisk-freeratethantheOIS(overnightindexedswap).LIBORisavailableformaturitiesofupto5LIBORisfreeofcreditrisksinceinterbankdepositsarefullyinsuredbytheUKgovernment.22-Anexcerptfrompastexam•AbuffalofarmerAnexcerptfrompastexam•Abuffalofarmerisconcernedthatthepricehecangetforhisbuffaloherdwillbelessthanhehasforecasted.Toprotecthimselffrompricedeclinesintheherd,thefarmerhasdecidedtohedgewithlivecattlefutures.Specifically,hehasenteredintotheappropriatenumberofcattlefuturepositionforSeptemberdeliverythathebelieveswillhelpoffsetanybuffalopricedeclinesduringthewinterslaughterseason.Theappropriatepositionandthelikelysourcesofbasisriskinthehedgeare,Short;choiceoffuturesdeliverydate.Short;choiceoffuturesasset.Short;choiceoffuturesdeliverydateandLong;choiceoffuturesdeliverydateand23-Anexcerptfrompastexam•ForuseinAnexcerptfrompastexam•ForuseinVaRcalculations,ariskmanagerisconsideringswitchingusinghistoricalvolatilitytoimpliedvolatility.Whichofthefollowingstatementsaboutimpliedvolatilityiscorrect?Impliedvolatilityismodeldependentandamisspecifiedmodelcanresultinerroneousforecasts.Impliedvolatilityassumesthathistoricalreturnsareindicativeoffuturereturns.Impliedvolatilitytendstounderestimatefuturevolatilityasaresultofmeanreversion.Impliedvolatilityestimatesaregenerallynotavailableforassetsonwhichderivativesaretraded.24-Anexcerptfrompastexam•WhichAnexcerptfrompastexam•WhichofthefollowingstatementsaboutstresstestingareStresstestingcancomplementVARestimationinhelpingriskmanagersidentifycrucialvulnerabilitiesinaStresstestingallowsuserstoincludescenariosthatdidnotoccurinthelookbackhorizonoftheVARdatabutarenonethelesspossible.AdrawbackofstresstestingisthatitishighlyTheinclusionofalargenumberofscenarioshelpsmanagementbetterunderstandtheriskexposureofa25-Anexcerptfrompastexam•WhichofthefollowingstatementsisAnexcerptfrompastexam•WhichofthefollowingstatementsiscorrectwhenevaluatingcountryandsovereignriskofaninternationalbondTheassessmentoftransferriskisimportantevenwhenevaluatinghome-currencydenominateddebt.Asaresultofregulatoryinitiatives,countryleveldataisgenerallypubliclyavailableanduptodate.Democraticcountrieswillhavealmostnopoliticalriskduetotheaccountabilityoftheirpoliticalsystems.Whencomparedtocorporatedefaults,sovereigndefaultsarerelativelyeasytomodelusingparametricmethods.26-Anexcerptfrompastexam•WhichofthefollowingAnexcerptfrompastexam•WhichofthefollowingstatementsaboutinternalcreditratingsystemsisWhenbacktestinginternalcreditratingsystems,theminimumtimeperiodrequiredforinvestment-gradesecuritiesshouldbegreaterthanthatrequiredfornon-investment-gradesecurities.Athrough-the-cycleapproachtodesigninginternalcreditratingsystemsleadstomoreratingchangesovertimethanapoint-in-timeapproach.Foraninternalcreditratingsystemtobeconsistent,banksmustusethesametransitionmatrixforallassetclasses.Aneffectivewaytocompensateforthedifficultyofobtainingqualitativedataforsmallfirmsistocombineaqualitativeapproachforlargefirmswithaquantitativeapproachforsmall27-TERMS!TTERMS!TERMS!28-I.29-I.29-AnalysisTechnical30-AnalysisTechnical30-Risk-freeNominalinterestRisk-freeNominalinterestRealinterestLibor:TheLondonInterbankOffered31-EfficientMarket-Weak-formEfficientMarket-Weak-form-Semi-strong--Strong-form32-PlainEmergingCPI:PlainEmergingCPI:ConsumerPrice33-II.FIXEDII.FIXED34-Basic35-Basic35-BulletZero-couponPerpetualBulletZero-couponPerpetualCallableEarlyPuttableConvertible36-CleanDirtyOn-the-RunCleanDirtyOn-the-RunOff-the-Run37-YTM:YieldToYTM:YieldToSpotYieldInvertedyield38-Overnight/Overnight/termFloatingrate39-USTreasuryTreasuryUSTreasuryTreasuryTreasuryTreasuryTIPS:TreasuryInflation-ProtectedSTRIPS:SeparateTradingofRegisteredInterestandPrincipalofSecurities40-MBS:Mortgage-backedCMO:MBS:Mortgage-backedCMO:CollateralizedMortgageABS:Asset-41-Munis:MunicipalGeneralMunis:MunicipalGeneralobligationRevenue42-CreditStandard&CreditStandard&Downgrade/Investmentgrade:>BBB-Speculativegrade:junkCredit43-III.FORWARDIII.FORWARDAND44-BasicUnderlying45-BasicUnderlying45-MarktoClearingMarktoClearingInitialMaintenanceMarginMarkto46-CrackCash47-CrackCash47-FinancialStockIndexFRA:FinancialStockIndexFRA:forwardrateFX:foreign48-49-49-BasicOptionwriter:BasicOptionwriter:Optionbuyer:Strikeprice:Expiry50-IntrinsicIntrinsic=IntrinsicIntrinsic=max[S-X,0]foracall=max[X-S,0]foraputIntheAttheOutofthe51-AO/AmericanEuropeanAO/AmericanEuropeanEarly52-Black-Scholes-HistoricalBlack-Scholes-Historicalvolatility/ImpliedThe53-54-54-S&PDJIA:Dow