CFA LOCK IN

formulas stuff to LOCK the fuck in before exam

Expected return (CAPM)

Market premium * Beta + Risk free

Portfolio Variance

Modified duration

Convexity

the curvature correction; duration alone assumes a straight line, convexity fixes the fact that the price-yield relationship bends

Full price change estimate

An estimate of a bond's price change that includes both the effects of duration and convexity based on interest rate movements.

Covariance

Weighted Average Cost of Capital

WACC = wd·rd·(1−t) + wp·rp + we·re
(d= debt, P = preferred, E = equity)

Put call Parity

Kan kastas om för priset för en call och en put

Money duration

Modified duration (PV * (1+r)^t/T

t= dagar sedan senaste kupongen, T= dagar i den fulla perioden (ex 90 dagar om kupongen varje kvartal)

Stock Forward

F0 = S0 * (1+r-q)^T

FX Forward

(vid arbitrage frågor, sälj dyr och köp billig)

Calculating floaters

1. Coupon = (mrr + QM)/periods → PMT.

2. TVM: N = years* periods → CPT I/Y gives the per-period discount rate.

3. Annualize (× periods), then DM = annualized rate − MRR.
   

DM>QM = Issuers credit worsened and market wants more than bond
DM<QM = Issuers credit improved and bond pays more than market req

Put call forward parity

Spearman rank correlation

1 - (6*d / n*(n*2 -1))
sample size n, Differences in ranks squared d.

Dividend discount model

Only valid when r > g. Den går att flytta runt för att ta reda på R också.

Sustainable Growth Rate

g=b×ROE

b = retention rate = 1 - dividend payout ratio.

ROE = ROA X levreage

Justified P/E Leading

Justified PE trailing

FCFE

Free cash flow to Equity