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# Category: Level III General

## Correlation . . . of, What, Exactly?

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…

## Sloppy Language, Sloppy Thinking: Don’t Try This at Home

As a mathematician, I’ve been trained to write and speak (and, consequently, to think) using precise, accurate terminology. There are, of course, occasions when even mathematicians abbreviate the things that they write or say, but on those occasions: We know that we’re abbreviating, and All mathematicians have agreed to the abbreviations used. As an educator,…

## Linear Interpolation/Extrapolation

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…

## Answering a Constructed Response (Essay) Question: Allocating Your Time

This will be a very short article. When you are allocating your time to answering a constructed response (i.e., essay, morning session) question, follow this simple rule: ⅔ – ¾ of your time should be spent thinking about your answer ¼ – ⅓ of your time should be spent writing your answer. Suppose that the question asks…

## Essay (Constructed Response) Questions: What’s the Point?

A recent session with one of my tutoring candidates brought to mind an interesting idea that is more than worthy of an article of its own: What’s the point? When you are writing an answer to an AM (constructed response, essay) question, you should ask yourself one simple question: What’s the point of my answer?…

## Cash (Currency): the Wonky Commodity

Throughout Level II and Level III – and a little bit at Level I – we see calculations that involve commodities; e.g., calculating the price or value of a forward or futures contract on an underlying commodity. In all of those calculations, the quantity of the commodity is constant; for example, if you’re given the…

## How to Approach the Level III CFA Exam

If you’ve never taken the Level III CFA exam, you’re in for a real treat. (If you’ve taken it before, you already know what I mean.) As with the Level I and Level II exams, this exam will be six hours – three in the morning, and three in the afternoon – and it will…