Reference prices, also called price benchmarks, are specified prices, price-based calculations, or price targets used to select and execute a trade strategy. Traders use reference prices to determine the effectiveness of their trades, both past and proposed. According to the…

Trade strategy inputs refer to the characteristics that inform the particular trade strategy chosen. The goal is to maximize the benefit of the trade, taking into consideration costs and risks. The following are the main inputs used in trade strategy…

Portfolios must be created and maintained to reflect the risk/return characteristics of the ultimate beneficiaries. This section discusses the different reasons why managers need to trade. While active managers have more motivation to trade, even passive managers will need to…

Institutional investors often employ an active risk budget, typically gauging how much their portfolio deviates from the investment policy targets annually, often as a tracking error limit. This limit might be increased to seek higher returns or decreased to reduce…

It is a fact that the Code of Ethics and Standards of Professional Conduct apply to all CFA stakeholders and that candidates hoping to pass the exams need to be well versed in the Ethics material. This Los provides a…

This section of the curriculum presents a case in which a university endowment is deciding on its asset allocation, as well as its liquidity needs. This summary may be used in conjunction with the reading as a synopsis or may…

An illiquidity premium is a return earned by investors for the commitment of capital for an uncertain amount of time. In other words, it is a charge for the usage of money. Illiquidity, or liquidity premiums as they are also…

Liquidity risk involves a cost associated with locking up investor capital for an uncertain duration. Large institutional investors must plan their portfolio's liquidity to maximize fund efficiency. For example, an endowment funding college student aid may need to distribute funds…

Learning Module 1: Private Investments and Structures Los 1(a): Features of Private and Public Investments, and The Characteristics of Private and Public Markets Los 1(b): Private Investment Methods and Structures and their Uses Los 1(c): The Difference between Public and…

Learning Module 1: Index-Based Equity Strategies Los 1(a): Compare factor-based strategies to market-capitalization-weighted indexing Los 1(b): Compare different approaches to index-based equity strategies Los 1(c): Compare different approaches to index-based equity investing Los 1(d): Compare the full replication, stratified sampling,…