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0
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1answer
49 views

Mathematically: How does increasing the number of assets reduce idiosyncratic risk?

As part of an Asset Pricing Module I'm currently taking, whilst looking at APT Ross (1974), we looked at how according to this model, risk originates from both systematic and idiosyncratic asset ...
0
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2answers
112 views

Step By Step method to calculating VaR using MonteCarlo Simulations

In trying to find VaR for 5 financial assets with prices over a long period of time(2000 days worth of data) how would I do the following: Carry out monte-carlo simulation in order to find a VaR ...
5
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4answers
619 views

Could we have prevented the World Economic Crisis in 2008?

There is an expression - "Too big to fall." - which means that if a bank or a financial institution manages a sufficient part of the financial assets than the state can't afford that this bank or ...
0
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1answer
42 views

ABS vs covered bonds vs CDO [closed]

What is the difference between asset-backed securities(ABS), covered bonds and collateralized debt obligations (CDO)?
0
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1answer
36 views

Do I calculate weights of assets correctly?

I solved attached question but I am not sure whether I did part a and c correctly. Is there a way to calculate weights of A and B by just knowing their standard deviation and correlation's value?
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0answers
45 views

Are commodities a real assets or a physical assets? [closed]

In CFA Level Reading 45 Commodities include precious metals, energy products, industrial metals, and agricultural products. Real assets are tangible properties such as real estate, airplanes, ...
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2answers
14k views
1
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1answer
63 views

bootstrap asset allocation

I want to ask if the bootstrap method for asset allocation is preferable. For instance, suppose that we have data for the past returns for two stocks. Is it wise to generate the efficient frontierby ...
0
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0answers
94 views

How do you calculate the asset drift rate in the Merton model? (used in N(-d2))

Can I replace it with the internal rentability rate? I only have the financial statements and some market data, but I can't find the expected returns anywhere. The goal is to calculate the probability ...
2
votes
1answer
118 views

Why asset management firms shouldn't be custodian of its own funds?

I am reading the Madoff case. One of the issue is BMIS Firm (Bernie Madoff Investment Securities) were acting as a Asset Management Firm, broker as well as Custodian. Why is it an issue? What sort of ...
0
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1answer
56 views

Data on banks’ leverage

Does someone know free resources to estimate the leverage of the banking and financial sector at an aggregate level? In particular I would be interested in something like Federal Reserve’s Flow of ...
3
votes
9answers
647 views

Why would there be a positive risk-free rate?

Most financial models include a risk-free rate or risk-free asset. Why should there be such thing as a positive risk-free rate? I dont see why an asset would provide a positive (real) return if it ...
3
votes
1answer
190 views

Single Most Important Fact about a Fund - Interview Question [closed]

I recently attended an interview to work as a software developer in an Asset Management company. I was asked by the interviewer: What is the most important piece of information that should be ...
0
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1answer
98 views

Plain vanilla risk parity with trends forecasting power

I have built an asset allocation model (plain vanilla risk parity) but I would like to adapt the initial asset allocation with respect to potential futures changes in the trends of the assets under ...
2
votes
2answers
152 views

Pricing Assets in the S&P Dynamic Asset Exchange

I am attempting to recreate the S&P Dynamic Asset Exchange using the methodology outlined in this paper. I am struggling to 'normalize' the prices of the assets properly. On page 6 of the ...