Helpful Notes

[jayembee]

@cohiba42

There are a few errors / typos in these notes. Be careful !

Not sure if you’ve read the entire thread, but a few have been pointed out to the author. If you can contribute, Im sure all of us following will appreciate you pointing them out as well.

[tavnazia]

@jayembee

@adam.runk64

It’s a seagull spread not a Gullwing spread and I’m about 100% certain it’s definetly in the cirriculum and it’s easy to understand. A short seagull spread is a collar plus selling an OTM put

Thanks, I was trying to illustrate a point, but left out the most obvious part. I know what a seagull spread is and perhaps it has been on past exams, but I can’t find it in the 2015 curriculum. More specifically, reading 28. Check out LOS 28.b… Can you tell me where exactly (page wise) you’re seeing this? Maybe it’s another reading, dunno…

If I’m not mistaken, this should be in the reading for concentrated single asset positions, whichever number that is.

Adam, thanks for the notes. A number of good points that explain a topic better than what I have in my notes.

[June06]

@adam.runk64

421. 6 Factors to consider with clients for alternatives - Tax issues, suitability, illiquidity, decision risk (risk they will panic and want to sell at worst time), communication with client, concentration in other stocks

422 50 Delta Option = ATM Call -50 Delta Option = ATM Put

25 Delta Option = OTM Call -25 Delta Option = OTM Put

75 Delta Option = ITM Call -75 Delta Option = ITM Put

423. Use currency swaps to take advantage of fact that domestic banks give domestic borrowers better rates because they are more familiar with them.

424. Dual currency bond = principal in domestic currency, coupon payments in foreign currency. Useful if corp generates enough foreign revenue to be able to pay coupons but not to pay the principal.

Equivalent to domestic bond + swap with no notional exchange

425. Structured notes are created to help investors get around constraints. Are bonds that are linked to equity indexes or are levered

426. Discretionary Trust = Creditor Protection

Fixed Trust = No creditor protection

427. Foreign Banks became QIS to protect non-us customer confidentiality

4 28. If rainfall is correlated with corn prices : Rainfall may influence corn prices but corn prices obviously do not influence rainfall. If looking at factors that influence rainfall corn prices would be considered exogenous.

429. If an investor perceives their wealth to be large relative to their needs they will have more risk willingness

430. Only asset manager firms can claim compliance with GIPS.

431. 3 Differences of Private Equity vs. Public Equitiy - Deal structure negotiated with manager and investors, can access internal projections, board participation by investors.

432. Cram Down - when a judge overrules a dissenting class of creditors invalidating the priority rule. The objecting creditors must receive property of equal value OR anyone below them (junior) gets nothing

433. New Value Exception - Retain equity interest in banktruptcy by new capital contribution.

434. Due Dilligence for Alternatives - Opportunity, Process, Org, People, Terms/Structure, Service Providers, Documents, Write up

Thanks for this.

Is 422 correct?

Delta of call = delta of put + 1

[sachin_patel]

@June06

@adam.runk64

421. 6 Factors to consider with clients for alternatives - Tax issues, suitability, illiquidity, decision risk (risk they will panic and want to sell at worst time), communication with client, concentration in other stocks

422 50 Delta Option = ATM Call -50 Delta Option = ATM Put

25 Delta Option = OTM Call -25 Delta Option = OTM Put

75 Delta Option = ITM Call -75 Delta Option = ITM Put

423. Use currency swaps to take advantage of fact that domestic banks give domestic borrowers better rates because they are more familiar with them.

424. Dual currency bond = principal in domestic currency, coupon payments in foreign currency. Useful if corp generates enough foreign revenue to be able to pay coupons but not to pay the principal.

Equivalent to domestic bond + swap with no notional exchange

425. Structured notes are created to help investors get around constraints. Are bonds that are linked to equity indexes or are levered

426. Discretionary Trust = Creditor Protection

Fixed Trust = No creditor protection

427. Foreign Banks became QIS to protect non-us customer confidentiality

4 28. If rainfall is correlated with corn prices : Rainfall may influence corn prices but corn prices obviously do not influence rainfall. If looking at factors that influence rainfall corn prices would be considered exogenous.

429. If an investor perceives their wealth to be large relative to their needs they will have more risk willingness

430. Only asset manager firms can claim compliance with GIPS.

431. 3 Differences of Private Equity vs. Public Equitiy - Deal structure negotiated with manager and investors, can access internal projections, board participation by investors.

432. Cram Down - when a judge overrules a dissenting class of creditors invalidating the priority rule. The objecting creditors must receive property of equal value OR anyone below them (junior) gets nothing

433. New Value Exception - Retain equity interest in banktruptcy by new capital contribution.

434. Due Dilligence for Alternatives - Opportunity, Process, Org, People, Terms/Structure, Service Providers, Documents, Write up

Thanks for this.

Is 422 correct?

Delta of call = delta of put + 1

Sounds right.

Sum of absolute delta is 1.

Put delta is negative.

so

call delta - put delta (negative negative =positive) = 1

call delta = 1+put delta.

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[jayembee]

@tavnazia

@jayembee

@adam.runk64

It’s a seagull spread not a Gullwing spread and I’m about 100% certain it’s definetly in the cirriculum and it’s easy to understand. A short seagull spread is a collar plus selling an OTM put

Thanks, I was trying to illustrate a point, but left out the most obvious part. I know what a seagull spread is and perhaps it has been on past exams, but I can’t find it in the 2015 curriculum. More specifically, reading 28. Check out LOS 28.b… Can you tell me where exactly (page wise) you’re seeing this? Maybe it’s another reading, dunno…

If I’m not mistaken, this should be in the reading for concentrated single asset positions, whichever number that is.

Adam, thanks for the notes. A number of good points that explain a topic better than what I have in my notes.

Im sure that its in passing in the readings, but it’s not a learning outcome statement. If it’s not an LOS, then it’s a nice to have vs. need to have. I guess my point got lost somewhere. These are great and if there is something you dont know when reviewing these bullets, just see if it’s required learning. That’s all.

[whk237]

Thank you for the good work adam!

[blinxbuckles]

@jayembee

@tavnazia

@jayembee

@adam.runk64

It’s a seagull spread not a Gullwing spread and I’m about 100% certain it’s definetly in the cirriculum and it’s easy to understand. A short seagull spread is a collar plus selling an OTM put

Thanks, I was trying to illustrate a point, but left out the most obvious part. I know what a seagull spread is and perhaps it has been on past exams, but I can’t find it in the 2015 curriculum. More specifically, reading 28. Check out LOS 28.b… Can you tell me where exactly (page wise) you’re seeing this? Maybe it’s another reading, dunno…

If I’m not mistaken, this should be in the reading for concentrated single asset positions, whichever number that is.

Adam, thanks for the notes. A number of good points that explain a topic better than what I have in my notes.

Im sure that its in passing in the readings, but it’s not a learning outcome statement. If it’s not an LOS, then it’s a nice to have vs. need to have. I guess my point got lost somewhere. These are great and if there is something you dont know when reviewing these bullets, just see if it’s required learning. That’s all.

Its actually an LOS…reading 19 on currency management

g. Describe trading strategies usde to reduce hedging costs and modify the risk-return characteristics of a foreign-currency portfolio

Then section 6,3 -Strategies to Reduce Hedging Costs and Modify a Portfolio’s risk profile

Subsection 6.3.5 Seagull Spread.

BOOM.

[wdebeer]

has somebody thrown the notes into Word yet?

I feel I also need to contribute, so here it is

https://www.youtube.com/watch?v=xolWjKkf244

[vicky_cool400]

Well starting with the summary reading now

Lets see how much i know in it

[jayembee]

@blinxbuckles

Its actually an LOS…reading 19 on currency management

g. Describe trading strategies usde to reduce hedging costs and modify the risk-return characteristics of a foreign-currency portfolio

Then section 6,3 -Strategies to Reduce Hedging Costs and Modify a Portfolio’s risk profile

Subsection 6.3.5 Seagull Spread.

BOOM.

And there it is, the LOS, all I ever wanted LOL. I think I may have lumped that in the “not likely to come up” category in my head, so I forgot about it (I know, I know… I should know better than that) Thanks for pointing out Mr. BOOM

[Would_You_Look_at_Th]

[original post removed]

[adam.runk64]

If you find any errors let me know and I will fix.

[vicky_cool400]

I think point 35 is wrong ?

If u hedge foreign market risk and not currency = foreign risk free rate

[vicky_cool400]

Point 77 seems wrong ? local sharpe ratio?

[adam.runk64]

No this is not wrong. Pure Segmentation assumes the market is unaffected by global economy which is the reason why the correlation will equal 1. If you are not given local market statistics just assume the global Sharpe is equivalent to the local sharpe

[adam.runk64]

You are correct on 35 it has been fixed thanks for the catch sorry for the typo

[vicky_cool400]

The last 3 recommendations especially fees and gift look dicey in AMC

I think they are required and nit just recommended

[adam.runk64]

No they are not required. All the required things in the asset manager code are vague. All the recommended things are specific. You should know them both as one question may be for both required and recommended while one man just be for required. It seems this would be way more common than a gips recommended question

[vicky_cool400]

Thanks man

These have been of great help

May god bless u