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When do you recognize a deferred tax asset and what's a valuation allowance?
Deferred tax assets are recognized when temporary differences or loss carryforwards will reduce future taxes. Under US GAAP, a valuation allowance reduces the DTA when realization is not 'more likely than not.' Under IFRS, the DTA is simply not recognized to the extent realization is not probable.
What are common tail risk hedging strategies for institutional portfolios?
Tail hedges: OTM puts, VIX longs, Treasuries, CTAs, gold, CDX protection. Trade off cost vs convexity. Typical budget 0.5-2% of portfolio.
What is the catering theory of dividends and how does it differ from signaling?
Catering theory (Baker-Wurgler 2004): firms adjust dividend policy to cater to time-varying investor sentiment, measured by the dividend premium. Differs from signaling (private info), clientele (heterogeneous preferences), and MM irrelevance...
What does intergenerational equity mean for an endowment and how is it measured?
Intergenerational equity requires each generation receives substantially the same real support, measured by real-value-per-beneficiary over time.
What constraints shape non-profit foundation investment policy beyond spending?
Non-profit foundations face 5% distribution rules, mission alignment, donor restrictions, and UPMIFA prudence shaping their IPS.
Bullet vs barbell strategy — which outperforms under which curve scenarios?
Bullet wins on stable curves and steepening; barbell wins on parallel shifts (convexity advantage) and flattening. Barbell sacrifices ~10–15bps of yield for ~0.3 extra convexity at equal duration.
How do I calculate the return from riding the yield curve?
Ride-the-curve return = yield earned + price gain from rolling down to lower yield. Example: buying 5Y at 4.75% and selling as 3Y at 4.20% after 2 years yields ~5.54% annualized vs 3.85% on 2Y directly.
What are stewardship codes and what do they expect from institutional investors?
Stewardship codes set expectations for institutional investors to engage, escalate, vote, and report on ownership responsibilities; the UK Code is the prominent benchmark.
How are CLO manager fees structured?
CLO manager fees are split into senior, subordinated, and incentive components, totaling roughly 40-55 bp per year plus performance-based upside.
What is the GP catch-up provision and how does it affect the carry split?
The catch-up provision is an intermediate tier in the distribution waterfall designed to make the GP 'catch up' to its full 20% share of total profit after LPs receive preferred.
Why is the PE hurdle usually expressed as an IRR rather than a simple return?
Private equity hurdle rates are expressed as IRRs because capital flows into and out of PE funds on irregular schedules over 5-10 years.
How do I evaluate management quality in credit analysis?
Management quality framework covers track record, strategy execution, financial policy, capital allocation, risk management, governance, transparency, and talent bench. For Crestone Hospitality CEO Renner: 8-year tenure, consistent policy, solid M&A discipline → strong M&G assessment, typically +/-1 notch rating adjustment...
What is autocorrelation and why does it matter for time-series analysis?
Autocorrelation in residuals biases OLS standard errors and is a classic smoothing fingerprint in illiquid fund returns — remedies include Newey-West and AR(1) models.
How does multiple correlation (R) relate to R-squared in regression?
Multiple R is the correlation between actual and fitted Y; R² is its square, measuring variance explained — but always cross-check with Adjusted R² for model comparison.
What do stock repurchases signal to the market?
Buybacks signal undervaluation, excess cash flow, and future confidence; tender offers signal more strongly than open-market. Positive 3-5% average announcement returns; long-run abnormal returns in value firms.
How do I compute effective duration for a callable bond?
EffDur = (V_minus - V_plus) / (2 * V_0 * delta_y). Shift tree rates up and down, revalue with call rules, compute. Callable duration is lower than straight because the call caps upside, dampening V_minus and flattening the price-yield curve...
How does volatility affect the value of callable and putable bonds?
Higher volatility widens the tree, making both call and put options more valuable. Callable bond price falls; putable bond price rises. Straight bond is unchanged. OAS is sensitive to volatility assumption — report at multiple vols for robustness...
How does a CDS auction work and what's the difference vs physical settlement?
CDS settle either via auction (cash-settle at auction-determined price) or physical settlement (deliver defaulted bonds for par). The 2009 Big Bang made auction standard...
What is a modern tontine and why are some researchers proposing revival?
A tontine is a pooled longevity arrangement where participants contribute capital to a collective fund; when a member dies, their share is forfeited to surviving members.
How is the efficient frontier computed in mean-variance optimization?
The efficient frontier is the set of portfolios minimizing variance for each target return. Solved via a family of quadratic programs with closed-form parabola when unconstrained...
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