CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.

org

Objectives Return • •

Risk • • Constraints Time Horizon

Taxes

Liquidity

Legal & Regulatory

Unique circumstances

1

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

FV Annual Tax (Accrual) =

FV Wealth Based Tax =

FV Deferred Account =

FV Deferred CG (MV = Basis) =

FV Deferred CG (MV ≠ Basis) =

If only a % of cap gains recognized each year (PCG), find equivalent rates r* = r* =

T* =

T* =

%R After Tax =

Accrual Equivalent R After Tax =

Accrual Equivalent Tax rate =

Tax Drag % =

2

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

P (Joint Survival) yr n =

Core Capital Value yr n =

Real rf =

RV =

T ig =

TB=

RV After tax taxable gift =
(if individual receiving pays)

RV After tax taxable gift =
(if bequest pays)

T Exemption Method =

T Credit Method =

T Deduction Method = T Source = T Residence =

Operating Assets B =

B=

Cov A,M =

3

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Covariance Matrix Covariance Equity Bonds Equity Bonds Sensitivity (B) Equity Bonds Market1 Market2 Cov 1,2 =

Jensen’s Alpha = • Treynor Measure = • Sharpe Ratio = • M2 = • • Sortino Ratio =

Downside Deviation = • • 4

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Grinold Kroner E(R) Equity =

Bond yield plus risk premium approach: • Historical equity risk premium = • Expected equity risk premium =

Singer Terhaar E(R) approach: • ERP Full integration = • ERP Full segmentation = • ERP = • E(R) = Taylor Rule R optimal =

PPP Exchange Rate =

Earnings Multiplier Approach: • Earnings multiplier =

• Return estimate =

5

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

FCFE =

LT Growth Forecast =

Utility Risk Adjusted Return = •

Roys Safety Criteria =

Optimal addition to new portfolio =

Corner Portfolio Theorem: • Req Return = • SAA = No Constraint with Tangency Portfolio: • Req Return =

Variance with Int’l Portfolio =

=

Variance FA =

=

Currency Contribution = • $ Return FA = 6

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Tracking Risk =

=

Portfolio spread duration = • •

Dollar Duration – DD =

Rebalancing ratio = • Cash needed =

Contingent Immunization Strategy: • Required Terminal Value =

• Required Assets at T =

• Safety of Margin =

Mean Reversion Analysis = •

7

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

N Futures for Target Duration =

Change in MV Foreign Bond =

Change in D Contribution Foreign Bond =

Levered Portfolio Return =

Levered Portfolio Duration =

Sample Leveraged = Portfolio Duration

Current Spread Payoff = • • •

FX Prem / Disc =

FX Fwd =

Fwd Prem = •

Int’l Unhedged Return =

8

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Int’l Hedged Return = Yield Adv Nominal =

Yield Offset A = • Positive & Negative Convexity: Price Increase Change = Price Decrease Change = 2 Bond Hedge: 1) Price Change for ______

Yield Offset B =

______

_________________

2)

Price Change for ______ ______ _________________

3) Solve for H2 and H10 Level: Twist: Hedge ratio:

9

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Active Return = Misfit Return =

Total / Portfolio Active Risk =

IR =

IR =

Swap Price n: Swap price = •

Swap price = •

Bootstrapping: •

10

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

F

0,T

=

F

0,T

=

or F
0,T

=

or

F

0,T

=

FV Storage Costs =

=

Lease Rate =

Return C&C Non Loanable = • Return C&C Loanable =

X-Y-Z Crack Spread =

Notional Principal on Fwd =

Long FRA Pmt =

Long FRA Pmt 0 =

11

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Historical VAR: • 5% VAR = • VAR Point =

Analytical VAR: • 5% VAR =

• 1% VAR =

E(R) Weekly =

Std Dev Weekly =

Variance Covariance VAR: • • • •

Fwd Asset Price =

Long Fwd Value = • • FX Fwd Contract Value = • • Credit Risk / Amount Owed = 12

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

P(R) Hedged = Translation gain/loss = Delta Hedge # of Option Contracts = • • Change in Delta =

Option premium =

Long FX Option Contract Value / Profit = • • Credit Risk / Amount Owed =

NF for Beta =

Return =

NF for Duration =

Create Synthetic Position: NF for Index =

$ Value for Synthetic = to invest in rf bonds

13

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

# of Synthetic Stk = Effective rate earned on interest rate swap: 1a) Interest rate payoff, call =

1b) Interest rate payoff, put =

2) FV option premium =

3) Interest income =

4) Effective rate earned =

Long Call VT = Short Call VT =

Long Put VT = Short Put VT =

Collar VT = Profit = B/E = Max Profit = Max Loss = PU,T =

Straddle VT = Profit = B/E = Max Profit = Max Loss = 14

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Bull spread VT = Profit = B/E = Max Profit = Max Loss = PU,T =

Bear spread VT = Profit = B/E = Max Profit = Max Loss =

Butterfly call spread VT = Profit = B/E = and B/E = Max Profit = Max Loss =

Box Spread VT = Profit = B/E = Max Profit = Max Loss = 15

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Swap Notional =

Floating rate note i pmt = D Floating Quarterly = D Floating Semi-annual = D Fixed = • • D N year receive fixed, pay floating quarterly =

Effective spread, Buy = Effective spread, Sell =

VWAP Price =

Estimated implicit costs, Buy = Estimated implicit costs, Sell = Implementation Shortfall:

Active mgmt return = Style return =

16

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

Information ratio = TWRR =

MWRR: End value = • Annualized LIRR =

Micro Attribution: • Pure Sector = • Allocation/Selection = • Within Sector =

Macro Attribution: • Asset category = • Benchmark/misfit = • Manager/Active =

Global Attribution: • Market allocation = • Currency allocation = • Security allocation =

17

CFA Level III Formula Sheet – Total Combined http://www.cpa-cfa.org

% R CF End =

R Original Dietz = • •

R Modified Dietz = •

Allocated Cash Beg period method =

Allocated Cash Strategic =

Income tax rate =

GIPS Total Return Real Estate =

Income Return (

)=

Capital Return =

18

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