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All posts for the day March 10th, 2014

Adjusting the Value/Duration of a Fixed Income Portfolio using Bond Futures

Posted by Bill Campbell III, CFA on March 10, 2014
Posted in: Level III Derivatives.

Adjusting the Value of a Fixed Income Portfolio The typical formula for computing the number of bond futures contracts needed to adjust the value of a fixed income portfolio is: \[N_f\ =\ \frac{V_T\ -\ V_P}{V_f}\left(\frac{Dur_P}{Dur_f}\right)\left(yield\ \beta\right)\] where: \(N_f\): number of bond futures contracts to buy (i.e., take the long position) or sell (i.e., take the […]

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Adjusting the Value/Beta of an Equity Portfolio using Equity Futures

Posted by Bill Campbell III, CFA on March 10, 2014
Posted in: Level III Derivatives.

Adjusting the Value of an Equity Portfolio The typical formula for computing the number of equity futures contracts needed to adjust the value of an equity portfolio is: \[N_f\ =\ \frac{V_T\ -\ V_P}{V_f}\left(\frac{\beta_P}{\beta_f}\right)\] where: \(N_f\): number of equity futures contracts to buy (i.e., take the long position) or sell (i.e., take the short position) \(V_T\): […]

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Cash (Currency): the Wonky Commodity

Posted by Bill Campbell III, CFA on March 10, 2014
Posted in: Level I General, Level II General, Level III General.

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 […]

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Leases: General

Posted by Bill Campbell III, CFA on March 10, 2014
Posted in: Level I Financial Reporting and Analysis, Level II Financial Reporting and Analysis.

A lease is a contract that lets one party use an asset owned by another party, in exchange for periodic payments.  The owner of the asset is the lessor; the user of the asset is the lessee.  For the purposes of financial reporting, leases are divided into two categories, based on the economic substance of […]

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