Level III

Access to all Level III articles until the next Level III exam date

If you were to ask (a random sample of) 100 financial advisors what the term “rebalance” means, I wouldn’t be surprised if 95 of them described it as “returning the portfolio to its original weights in each asset class”, or something tantamount to that. In other words, the investing world overwhelmingly equates rebalancing with a […]

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Level III candidates often confuse cross hedges and proxy hedges.  This isn’t their fault: one of the readings makes a distinction between these, while another claims that they’re the same (though it includes a footnote that says that they’re different). Sigh. Suppose that your domestic currency is the Canadian dollar (CAD), and that you have […]

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After reading a number of posts on AnalystForum in which candidates have had difficulty with linear interpolation or extrapolation, I figured it was time to write an article on the subject.  At Level I it applies to binomial trees for calculating the weights for equity options, and for combining risky portfolios with the risk-free asset […]

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The idea of immunization is fairly straightforward: you have a known set of liabilities due at known future dates, and you want to create a portfolio that will fund those liabilities with a minimum of risk, at a reasonable price.  Two types of immunization are discussed in the CFA curriculum: classical immunization and contingent immunization.  […]

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CFA® Level III Membership

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The idea of immunization is fairly straightforward: you have a known set of liabilities due at known future dates, and you want to create a portfolio that will fund those liabilities with a minimum of risk, at a reasonable price.  Two types of immunization are discussed in the CFA curriculum: classical immunization and contingent immunization.  […]

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CFA® Level III Membership

This will give you access to this and all other articles at that membership level.

A prepaid variable forward (PVF) is a hybrid security that is quite useful in monetizing a concentrated position in publicly traded stock.  In essence, a PVF is a combination of an equity collar and a loan.  A simple example will make it clear how a PVF works, and how it can be used to monetize […]

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CFA® Level III Membership

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I came across some topics in currency exchange at Level III that seemed to be vexing some candidates, so I thought that it warranted an article.  This will be a catch-all: anything on currency exchange at Level III across which I stumble I’ll include here. Domestic Currency Return vs. Local Currency Return Suppose that your […]

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CFA® Level III Membership

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If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

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

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If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

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

This will give you access to this and all other articles at that membership level.

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

This article is for members only.  You can become a member now by purchasing a

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

This will give you access to this and all other articles at that membership level.