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Standardized betas are used in ____ models not ____ models.

Standardized betas are used in fundamental factor models not macroeconomic factor models.

According to Standard IV(C) Responsibility of Supervisors, if a compliance system is non-existent or if an existing compliance system is inadequate, a member should…

…not accept supervisory responsibility until the firm adopts reasonable procedures to allow adequate exercise of supervisory responsibilities.

Thus a charter holder or candidate should undertake a review prior to accepting a position with supervisory authority.

Standard III(D) Performance Presentation recommends performance presentations include:

a weighted composite of similar portfolios rather than using a single representative account such as a composite including all client accounts.

The Cobb-Douglas function exhibits ____

Constant Return to Scale

This means if all inputs:

  • T = Growth of Technology
  • K = Growth of Capital
  • L = Growth of Labor
  • (1-α) = labor cost in total factor cost

are increased at the same percentage then output rises at that percentage.

Steady State Rate of Growth (formula)

g = ∆Y/Y = ϑ/(1-α) + n

ϑ = growth rate of total factor production

(1-α) = labor cost in total factor cost

n = labor force growth rate

Current account deficit leads to a depreciation of domestic currency due to:

  1. flow mechanism
  2. portfolio composition mechanism
  3. debt suitability mechanism

Spread Quote is affected by:

  1. Spread in the interbank market for the same currency pair
  2. Size of the transaction
  3. Relationship between the dealer and client.

Interbank spread is affected by:

  1. Currencies involved
  2. Time of day
  3. Market volatility

Conditional VaR is a measure of ____

Tail Risk

that provides an estimate of the average loss that would be incurred if the VaR cutoff is exceeded.

Marginal Dividend Tax (formula)

Pw – Pd = D * [(1 – Td)/(1 – Tcg)]

Pw = Stock price prior to dividend and eligible for dividend

Pd = Stock price after dividend

D = amount of dividend

Tcg = marginal capital gains tax

Td = marginal dividend tax

Solve for missing variable, usually Td.