Fixed-income return expectations CFA Flashcards - Medical Study Cards
Master Fixed-income return expectations with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.
Fixed-income return expectations Flashcard Deck - 10 Cards
Flashcard 1: Black-Litterman
Answer: implied excess returns from a reverse optimization are adjusted to reflect the investor’s unique views, and then resolves for an EF.
Flashcard 2: Annualized variance
Answer: annualized variance = daily variance × 252
Flashcard 3: **Risk premium approach to expected bond return**
Answer: 
Flashcard 4: 10-Year Moving Average P/E Ratio\
*Relative Equity Market Valuation*
Answer: The numerator of the P/10-Year MA(E) is the market price of the S&P 500 price index, and the denominator is the average of the previous ten years' reported real earnings. Both the numerator and the denominator are adjusted for inflation using the consumer price index.
The analyst compares its current value to its historical average to determine whether the market is over or underpriced. eg lower ratio than average indicates the index is overpriced.
Pros:
- Removes the effects of the business cycle and inflation
Cons:
- Accounting changes
- Another method of estimating past earnings might be appropriate
- Long periods of high or low P/E can persist
Flashcard 5: Covariance (Long)
Answer: Cov(i,j)=Beta(i,1)\*Beta(j,1)\*Var(F1) + Beta(i,2)\*Beta(j,2)\*Var(F2) + (Beta(i,1)\*Beta(j,2)+(Beta(i,2)\*Beta(j,1))\*Cov(F1,F2)
Flashcard 6: Approaches to Economic Forecasting
Answer: 1. Econometric Models
2. Economic Indicators
3. Checklist Approach
Flashcard 7: Z-Scores
Answer: 5% = 1.65\
1% = 2.33
Flashcard 8: Covariance
Answer: 
Flashcard 9: Commodities as an Inflation Hedge
Answer: Two factors affect whether a commodity is a good hedge against unexpected inflation: storability and demand relative to economic activity.
- Storable commodities have superior inflation hedging properties.
- Commodities that are most affected by the level of economic activity (energy, precious metals) tend to be better inflation hedges.
Flashcard 10: Financial Equilibrium Approach
Answer: The Financial Equilibrium Approach assumes that supply and demand in global asset markets are in balance. One such model is ICAPM:
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