CFA Level III

CFA Level III
Formula Sheet – Total Combined

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Objectives
Return
Risk
Constraints
Time Horizon
Taxes
Liquidity
Legal & Regulatory
Unique circumstances
1
CFA Level III
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
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
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
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
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
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
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
Int’l Hedged Return =
Yield Adv Nominal =
Yield Offset A = Yield Offset B =
Positive & Negative Convexity:
Price Increase Change =
Price Decrease Change =
2 Bond Hedge:
1) Price Change for
______ ______ _________________
2) Price Change for
______ ______ _________________
3) Solve for H2 and H10
Level:
Twist:
Hedge ratio:
9
CFA Level III
Active Return =
Misfit Return =
Total / Portfolio Active Risk =
IR =
IR =
Swap Price n:
Swap price =
Swap price =
Bootstrapping:
10
CFA Level III
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
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
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
# 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 = Long Put VT =
Short Call VT = Short Put VT =
Collar -
VT = PU,T =
Profit = Max Profit =
B/E = Max Loss =
Straddle -
VT =
B/E = Max Loss =
14
CFA Level III
Bull spread -
VT = PU,T =
B/E = Max Loss =
Bear spread -
VT =
B/E = Max Loss =
Butterfly call spread -
VT =
B/E = Max Loss =
and
B/E =
Box Spread -
VT =
B/E = Max Loss =

15
CFA Level III
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
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
% 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

CFA Level III - Combined Total Formula Mini Test

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Formula Sheet – Total Combined

Legal & Regulatory

FV Annual Tax (Accrual) =

FV Wealth Based Tax =

FV Deferred CG (MV = Basis) =

FV Deferred CG (MV ≠ Basis) =

Accrual Equivalent R After Tax =

Accrual Equivalent Tax rate =

Core Capital Value yr n =

RV After tax taxable gift =

RV After tax taxable gift =

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 =

PPP Exchange Rate =

Earnings Multiplier Approach:

Utility Risk Adjusted Return =

Roys Safety Criteria =

Optimal addition to new portfolio =

Corner Portfolio Theorem:

No Constraint with Tangency Portfolio:

Variance with Int’l Portfolio = =

Portfolio spread duration =

Contingent Immunization Strategy:

• Required Terminal Value =

Mean Reversion Analysis =

N Futures for Target Duration =

Change in MV Foreign Bond =

Change in D Contribution Foreign Bond =

Levered Portfolio Return =

Levered Portfolio Duration =

Current Spread Payoff =

Int’l Unhedged Return =

Yield Adv Nominal =

Yield Offset A = Yield Offset B =

Positive & Negative Convexity:

Price Increase Change =

Price Decrease Change =

1) Price Change for

______ ______ _________________

2) Price Change for

______ ______ _________________

3) Solve for H2 and H10

Total / Portfolio Active Risk =

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 =

_____________

_____________