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All posts for the month July, 2022

The tax base (it used to be tax basis, but somehow it changed to tax base; I think the reason is that the plural for each word is “bases” (pronounced <base-eez> and <base-ezz>, respectively), that someone mistook “bases” (plural of “basis”) to be “bases” (plural of “base”), and the error caught on) of an asset […]

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CFA® Level I Membership, CFA® Level I Financial Reporting and Analysis (FRA) Membership

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One of the reasons that Level I candidates find income taxes confusing is that the Income Tax Expense shown on a company’s income statement generally is not equal to the tax liability that is shown on their income tax return.  The fact that they are different from each other is a little easier to understand […]

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I debated for a long while whether to write a single article about taxes, or to write separate articles about each of the bits that go into taxes  I think that separate articles is the way to go.  So this is the general article that ties it all together, and provides definitions for all of […]

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By “return attribution” we mean breaking down the realized return on a portfolio (in this case, specifically an equity portfolio) into a number of practically significant pieces; in other words, it’s the analysis of the realized return.  In the CFA curriculum, there are two flavors of equity return attribution: macro attribution and micro attribution.  I’ll […]

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I know: it sounds like something out of a science fiction movie. Sometimes it looks that way. However, once it’s explained well, at least it should be easy to follow and understand.  I’ll do my best to explain it well. Also, I’ll abbreviate inter-temporal rate of substitution as ITRS; it’ll save me a lot of […]

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I already wrote an article on the tendency of people in finance to be sloppy in the language they use; you’ll find it here.  The purpose of this article is to expand on one specific area in which the language of finance people is particularly sloppy: correlation.  The problem, as I see it, is that […]

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What do we mean by “currency management”? In a nutshell, we mean managing (i.e., adjusting) our exposure to changes in currency exchange rates. We might, for example, Hedge 100% (or as close to 100% as we can get) of our exposure to exchange rates (that exposure arising from existing investments in securities denominated in currencies […]

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CFA® Level III Membership, CFA® Level III Derivatives Membership

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