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CFA Level II Updated
How does CPI seasonality affect TIPS pricing and returns?
TIPS (Treasury Inflation-Protected Securities) adjust their principal based on the non-seasonally-adjusted CPI-U with a ...
How do you decompose the inflation breakeven rate, and what are its components beyond expected inflation?
The breakeven inflation rate (BEI) is often used as a market-based measure of expected inflation, but it actually contai...
What is a cross-currency basis swap and why does the basis deviate from zero?
A cross-currency basis swap exchanges floating-rate cash flows in two different currencies, with principal exchanged at ...
What is a constant maturity swap (CMS) and how does it differ from a standard interest rate swap?
A constant maturity swap (CMS) is an interest rate swap where one leg pays a rate that resets periodically to a **long-t...
How do you structure a credit curve steepener trade and when is it profitable?
A credit curve steepener profits when the spread difference between long-dated and short-dated CDS widens. You sell prot...
What drives the basis between single-name CDS spreads and CDS index spreads?
The CDS index basis is the difference between the theoretical index spread (calculated from constituent single-name CDS)...
What is the correlation smile in CDO/tranche pricing and why does it appear?
The correlation smile (or correlation skew) is the phenomenon where different CDS index tranches imply different default...
How do CDS index tranches work and what risk do they isolate?
CDS index tranches slice the default risk of a credit index (like CDX or iTraxx) into layers that absorb losses sequenti...
What are dark pools and how do they affect equity market microstructure?
Dark pools are private trading venues (Alternative Trading Systems or ATSs) where buy and sell orders are matched withou...
What is portable alpha, and how do investors separate alpha from beta?
Portable alpha separates the generation of excess returns (alpha) from market exposure (beta). The investor obtains beta...
What is a 130/30 strategy and how does it differ from a traditional long-only fund?
A 130/30 strategy (also called an extension strategy) starts with 100% capital, shorts 30% of AUM, and reinvests the sho...
How do you construct a market-neutral equity portfolio and what risks remain?
A market-neutral portfolio targets zero systematic (market) exposure by balancing long and short positions so that the p...
How does pairs trading use cointegration, and how is it different from correlation?
Pairs trading is a market-neutral strategy that exploits temporary mispricings between two historically related securiti...
How does sector rotation work and what drives the timing of rotations?
Sector rotation is an active investment strategy that overweights or underweights sectors based on the expected phase of...
How do you backtest a quantitative equity screen and interpret the results?
Backtesting a quantitative equity screen involves applying historical data to see how the screened portfolio would have ...
What is a stock screening methodology and how do professional analysts build screens?
Stock screening is a systematic process of filtering a large universe of equities using quantitative criteria to identif...
What is a dividend capture strategy and does it actually generate alpha?
A dividend capture strategy involves purchasing shares before the ex-dividend date to receive the upcoming dividend, the...
When should I use Price-to-Cash-Flow instead of P/E for equity valuation?
Price-to-cash-flow (P/CF) ratios are preferred over P/E in several situations because cash flow is harder to manipulate ...
How do you determine when R&D costs transition from the research phase to the development phase under IFRS?
Under IAS 38, internally generated intangible assets follow a two-phase model. The distinction between research and deve...
What is the step-by-step process for derecognizing a subsidiary from consolidated statements?
Derecognition occurs when a parent loses control of a subsidiary -- whether through sale, dilution, or contractual chang...
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