Welcome to my RU-vid channel! I'm an experienced CFA & FRM Program instructor with a passion for financial and risk modeling. Join me as we delve into the world of the CFA program, FRM certification, CTP designation, and Financial Modeling. Through informative tutorials and engaging discussions, I'll provide valuable insights and practical guidance to help you excel in these areas. Whether you're a beginner looking to explore the fundamentals or an experienced professional seeking to enhance your skills, my videos are designed to cater to a diverse audience. By subscribing to my channel, you'll gain access to a wealth of educational content and become part of a vibrant community of finance enthusiasts. Stay up to date with the latest videos by hitting the notification bell, and let's embark on an exciting educational journey together. Get ready to unravel the complexities of finance and modeling and unlock your full potential in these dynamic fields!
What if we had First 2 payments with no amortization. The fixed rate would only consider the last two payments for the calculation? Nowadays im used to goal seek in order to get the fixed leg value equal the floating leg in excel. This would help a lot Thanks!!
This is a good video - Thanks for explaining. I noticed this is the kind of question that was in one of the CFA mock exams. However, what I don't get it is why is this different from the curriculum itself; where PV is given and we have to multiply by PV. Also there was no division by the last rate which is what you did here by dividing it by 3.20%. I am just confused which calculation to use when a question like this is given.
Hi Fabian! Thanks again for the useful examples! Not sure if its a mistake but the 2nd case where the minimum denomination is 10,000 shouldn't we overshoot the required liability? instead of 3,570,000 it should be 3,580,000. with coupon it adds up to 3,759,000 so that it meets the liability of 3,750,000. The current working only adds up to 3,748,500. THanks in advance!
NICE VIDEO , for remembering purpose can we take protection buyer is like to buy put option and lower spread is a sign of downmove so in this case protection buyer having a profit and receive upfront payment , on the contra selling spread is like a selling put and if spread is widen it is bullish sign and spread seller received upfront payment ? THANKS and REGARD
Hi Fabian, Firstly thanks for the awesome material. Whenever I am in doubt I come to your channel to seek wisdom. However I am experiencing some slight confusion on the 2 cases you shown. First case treats the 3 years returns as after tax returns however the 2nd case treats them as pre-tax returns? Or am I missing something entirely here. Appreciate it if anyone can help shed some light as well! Exam in 10 days
Hi Leonard, can you elaborate more on how the 2nd case treats them as pre-tax returns. The method in both cases except for how the capital gains are calculated. Everything else is the same.
@@FabianMoa Haha I assume I am missing something. Thanks for the fast response. in the 2nd case the 16.8% is taxed at 25%. Resulting in a post tax return of 12.6% annualized to 4.044%. However in the first case the 16.8% isn’t taxed.
I see. For the 2nd case, the capital gains is 0.168 (=1.168 - 1). For the 1st case, the capital gains is 0.1168 (= 10% × 1.168). In both cases, the gains would be taxed at 25%. So I am not treating them like pre-tax returns.
@@FabianMoa oh! Ok I will rewatch and digest with that in mind. Thanks so much for elaborating. I think my gap is the understanding of embedded capital gains. Much appreciated
@@FabianMoa Ok post digesting I think i know where is root cause of my error is. Comparing both cases I would have thought that the case with embedded capital gains tax would have a lower post liquidation return v.s the one where tax basis is zero. The Taxable amount for case 1 is only 10% of the final value at a 25% rate. 1 outstanding question I have is why is the 16.8 returns% not taxed at 25% for the first example? E.g 1 where Embedded capital gains taxable is 10% of final value Therefore Final value = 1.168 (This is where i am confused) Tax = 1.168*0.1*0.25= 0.0292 Returns post tax = 1.168*(1-0.0292)=1.1388 Annualized = 4.4444% E.g 2 where Tax basis of 1 Tax = (1.16844-1)*0.25=0.04211 Returns post tax = 1.168-0.04211=1.12589 Annualized = 4.045% My calculation for case 1. Portfolio has 10% embedded capital gains untaxed. Tax = ((1.168*1.1)-1)*0.25=0.0712 Returns post tax = ((1.1*1.168)-0.0712)/1.1=1.10327 Annualized =3.3333% In dollar terms. I started with 110 dollars (10 dollars capital gains unpaid in tax). Post 3 years returns I now have 110*1.168 =$128.48. Tax payable = 28.48*0.25=7.12 dollars Port after tax = 128.48-7.12=121.36 Return = 121.36/110 = 10.327% Annualized 3.3333% Many thanks for clarifying! Appreciate the time and if it sounds like a silly clarification please do let me know
Hello Fabian, thank you so much. Could you explain the final step what does the -1/p x Dp/Dy on the left-hand side represent, specifically the negative? I was following up until that step. Thank in advance
You are amazing. Can you do how to write an IPS for different insitutions / indiviual investors, please?? My exam is next Saturday and I am struggling on this piece! If you don't mind us requesting topics too, would be amazing for you to cover a couple of others.
In Australian, we study: S0 -> Su -> Su' -> Suu -> Suu' Sud -> Sud' -> Sd -> Sd' -> Sdu -> Sdu' Sdd -> Sdd' Su = S0 x u; Su' = Su - Div1; Suu = Su' x u; Suu' = Suu - Div2 Sud = Su' x d; Sud' = Sud - Div2 Sd = S0 x d; Sd' = Sd - Div1; Sdu = Sd' x d; Sdu' = Sdu - Div2 Sdd = Sd' x d; Sdd' = Sdd - Div2 Not discount anything to Div0 (the present value of dividend). It moves at each period having dividends, that dividend will be deducted from the price of that step after dividend paying.
Great video - a rare and valuable resource, thank you for sharing. A question (well multiple linked questions): - Why do you add a negative to the VaR and CVaR formulas? If you have more negative returns than positive, can't you have a negative VaR? Does a negative VaR impact the subsequent CVaR calculation?
Sir expected currency gain , it is assume foreign currency will strength against domestic currency in simple term us dollar is strength against Australian dollar ? Thanks and Regard.
In the case, they will usually tell you how the two currencies change relatively. And this was video was done 4 years ago, where I just added the expected currency gains (more of an approximation method). The current syllabus uses: R(DC) = [1 + R(FC)] x [1 + R(FX)] - 1
so is there a difference in payoffs between put bull spread and bull call spread? wouldn't max loss just be your net in/outflow when buying/shorting both puts? i.e. they both expire out of the money, have a value of $0 and you are just out of pocket whatever you paid Thanks
The discount rate used in calculating the surrender cost index is typically determined by the insurance company issuing the policy. However, industry standards and guidelines, such as those provided by the National Association of Insurance Commissioners (NAIC) or similar regulatory bodies, may influence the selection of an appropriate discount rate. These standards ensure consistency and fairness in the calculations, allowing for more reliable comparisons between different policies and insurance providers.
