Trading Strategies
After completing this reading, you should be able to: Explain the motivation to initiate a covered call or a protective put strategy. Describe principal-protected notes (PPNs) and explain necessary conditions to create a PPN. Describe the use and calculate the…
Messages from the Academic Literature on Risk Management for the Trading Book
After completing this reading, you should be able to: Explain the following lessons on VaR implementation: time horizon over which VaR is estimated, the recognition of time-varying volatility in VaR risk factors, and VaR backtesting. Describe exogenous and endogenous liquidity…
VaR Mapping
After completing this reading, you should be able to: Explain the principles underlying VaR mapping, and describe the mapping process. Explain how the mapping process captures general and specific risks. Differentiate among the three methods of mapping portfolios of fixed…
Backtesting VaR
After completing this reading, you should be able to: Describe backtesting and exceptions and explain the importance of backtesting VaR models. Explain the significant difficulties in backtesting a VaR model. Verify a model based on exceptions or failure rates. Identify…
Basel II.5, Basel III, and Other Post-crisis Changes
In this chapter, we begin by discussing what Basel II.5 is all about. This is a collection of changes to the Market risk capital computation put in place by the Basel Committee due to the large losses banks experienced during…
Standard VII(A) – Conduct as participants in CFA Institute programs
Members and Candidates must not participate in any activity that jeopardizes CFA Institute’s or the CFA designation’s reputation, integrity, or security of CFA Institute programs. Application 1: Writing After Exam Period End Fiona King, a CFA Level III candidate, took…
Standard VI(A) – Disclosure of Conflicts
All issues that could reasonably be expected to compromise their independence and objectivity or conflict with their respective duties to their clients, prospective clients, and employer must be disclosed fully and fairly by Members and Candidates. Application 1: Personal Stock…
Standard V(A) – Diligence and Reasonable Basis
Members and Candidates must: Analyze investments, give investment recommendations, and take investment activities with diligence, independence, and completeness. Have a reasonable and adequate basis for any investment analysis, recommendation, or action, backed by suitable research and investigation. Diligence and Reasonable…
Standard IV(A) – Loyalty
Members and Candidates must act in the best interests of their employers, not denying them the benefit of their skills and abilities, divulging sensitive information, or harming them in any other way. Members and Candidates should act in the best…
Standard III(A) – Loyalty, Prudence, and Care
Members and Candidates owe their clients a responsibility of loyalty, and they must act with reasonable caution and sound judgment. Members and Candidates must work in the best interests of their clients, putting their clients’ needs ahead of their employer’s…
