Hypothesis Testing
After completing this reading, you should be able to: Construct an appropriate null hypothesis and alternative hypothesis and distinguish between the two. Construct and apply confidence intervals for one-sided and two-sided hypothesis tests, and interpret the results of hypothesis tests…
Swaps
After completing this reading, you should be able to: Explain the mechanics of a plain vanilla interest rate swap and compute its cash flows. Explain how a plain vanilla interest rate swap can be used to transform an asset…
Determine the distribution of order statistics from a set of independent random variables
Order Statistics Order Statistics are distributions obtained when we look at test scores from a random sample arranged in ascending order, i.e., from the smallest to the largest. In recent years, the importance of order statistics has increased because of…
Application of the Code and Standards
The curriculum’s next section covers Standards I-VII with guidance provided in Reading 30 and Reading 31. The CFAI Curriculum offers numerous case examples and advice on applying the Code and Standards. Candidates receive a downloadable e-book as part of their…
Guidance for Standards I–VII
The curriculum’s next section covers Standards I-VII with guidance provided in Reading 30 and Reading 31. The CFAI Curriculum offers numerous case examples and advice on applying the Code and Standards. Candidates receive a downloadable e-book as part of their…
Pros and Cons of an Enterprise Risk Management System
Case Study: Evaluation and Improvement of Enterprise Risk Management System Background: Alpha Corporation is a global multinational corporation operating in various industries. The company has implemented an enterprise risk management (ERM) system to identify, assess, and mitigate risks. As a…
Long-Term Direct Investment Risks
Case Study: Risk Management for Long-Term Direct Investments Background: ABC Investments is an institutional investor specializing in long-term direct investments in private companies. As a CFA Level 3 candidate, you have been asked to discuss various methods to manage the…
Financial and Non-Financial Risk Exposures
Case Study: Analysis of Financial and Non-Financial Risk Exposures in the Portfolio Strategy of ABC Investments Background: ABC Investments is an institutional investor managing a diversified portfolio on behalf of its clients. The portfolio includes asset classes such as equities,…
Challenges Related to Environmental and Social Factors Encountered by Institutional Investors
Universal Ownership, Externalities, and Responsible Investing The challenge for universal owners lies in effectively managing risks stemming from these externalities. Costs externalized by one portfolio company can impact the profitability of others, affecting overall returns. For instance, investments in a…
Challenges in Financial Risk Encountered by Institutional Investors
Dimensions of Financial Risk Management The primary goal of risk management is to prevent threats that could endanger an organization’s existence. These threats encompass financial, like market losses and liquidity issues impacting cash flow, and non-financial risks, such as reputational…
