Exogenous shocks refer to external factors (created outside the economic model) that profoundly affect an economy’s growth. While some factors enhance growth, others impede growth. The following is a summary of typical shocks. Sources of Exogenous Shocks Policy changes: These…

Inappropriate capital market expectations could be devastating to portfolio performance. Several pitfalls could lead to false expectations and a less-than-optimal asset allocation. Regardless, the analyst is tasked with following a disciplined process and understanding potential challenges in developing capital market…

Capital market expectations involve setting likely risk and return parameters for a portfolio. These expectations inform the asset allocation that is ultimately selected, which is the investment results’ primary driver. Macro expectations involve forecasting risk and returns for an entire…

Learning Module 1: The Private Wealth Management Industry Los 1(a): Discuss the typical business models of private wealth management service providers and their segment-based strategies Los 1(b): Discuss typical fee, revenue, and compensation structures prevalent in the private wealth management…

All asset managers should have a trade policy document that clearly and comprehensively articulates the firm's trading policies and escalation procedures. The curriculum can be quite wordy in this section. The heart of the message is simply this: “Firms need…

Trade execution, a quantitative process assesses the performance of traders, algorithms, and brokers. Trade cost assessment, known as Trade Cost Analysis (TCA) or post-trade analysis, aids portfolio managers in selecting optimal trading methods and identifying and rectifying process issues. This…

Trade Cost Measurement In its simplest terms, trade cost would just represent the commission paid to place a trade. However, this view is simplistic in that it only represents a portion of the total costs. The vocabulary from Reading 11,…

The following sections compare and contrast trading within the following markets: Equities. Fixed income. Exchange-traded derivatives (options and futures). Off-exchange (OTC) derivatives. Spot currencies. Equities Equities offer the most robust and viable platform for electronic trading. Equities are the most…

Algorithmic trading is the practice of using programmed strategies to electronically trade orders. This practice is common in most equity, foreign exchange, and exchange-traded derivative markets. As with fixed income, algorithmic execution is mostly limited to trading highly liquid government…

The goal of any trade is to find a balance between the cost of execution and other risks with the benefits expected from executing the trade. Various trades have differing desired outcomes (i.e., making a quick profit vs. rebalancing a…