Making Money with Bonds In the article on yield curve strategies in general, I mentioned the two broad ways to make money with bonds: Coupons (more generally, to incorporate synthetic strategies using, for example, swaps: interest payments) Price changes The curriculum breaks down the expected return on a bond in this manner: \begin{align}E\left(R\right) &≈ Coupon\ […]

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A time-honored method to determine the value of an investment is to discount to the present all of the investment’s (expected) future cash flows, and tot up those present values. It’s a method we use commonly when valuing bonds, and when valuing projects in which a company is considering investing (e.g., whether or not to […]

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- Present value models (also known as
*discounted cash flow models*)- Dividend discount models (DDMs)
- Free cash flow to equity (FCFE) models
- Free cash flow to the firm (FCFF) models

- Multiplier models (also known as
*market multiple models*)- Share price models
- Price-to-earnings (P/E) ratio
- Price-to-sales (P/S) ratio

- Enterprise value (EV) models
- EV/EBITDA ratio

- Share price models
- Asset-based models

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

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If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

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**CFA® Level II Derivatives Membership, CFA® Level II Membership, CFA® Level III Membership, CFA® Level III Derivatives Membership**

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If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but […]

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**CFA® Level II Derivatives Membership, CFA® Level II Membership, CFA® Level III Membership, CFA® Level III Derivatives Membership**

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In 2019, CFA Institute revised all of their Level III Fixed Income readings, and, in particular, came up with a 10-page blue box example that was absurdly complex, which I simplified here. That example’s gone. Fortunately. (In point of fact, I’m sorry that the idea is gone from the curriculum, because it was interesting and […]

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The tax base (it used to be tax basis, but somehow it changed to tax base; I think the reason is that the plural for each word is “bases” (pronounced <base-eez> and <base-ezz>, respectively), that someone mistook “bases” (plural of “basis”) to be “bases” (plural of “base”), and the error caught on) of an asset […]

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One of the reasons that Level I candidates find income taxes confusing is that the Income Tax Expense shown on a company’s income statement generally is not equal to the tax liability that is shown on their income tax return. The fact that they are different from each other is a little easier to understand […]

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I debated for a long while whether to write a single article about taxes, or to write separate articles about each of the bits that go into taxes I think that separate articles is the way to go. So this is the general article that ties it all together, and provides definitions for all of […]

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