AWMA Complete Study Questions And Answers
Capital Market Line ANS A graphical representation of the relationship between risk and return, where risk is measured by standard deviation; the CML includes the concept of a risk-free rate of return
Jenson Performance index ANS Used in comparing per...
AWMA Complete Study Questions And Answers
Capital Market Line ANS A graphical representation of the relationship between risk and return, where risk is
measured by standard deviation; the CML includes the concept of a risk-free rate of return
Jenson Performance index ANS Used in comparing performance money managers on a risk-adjusted basis and
can be used by itself. A number above 0.00 indicates the manager had better performance than would be expected
given the risk he took... vice versa
How are Treynor and Sharpe indexes best used? ANS Both are used to compare the risk - adjusted returns on
diff funds. The higher the risk-adjusted return, the better. The key diff is that Treynor uses Beta as its risk measure,
so Treynor can only be used with fully diversified portfolios. Sharpe, uses Standard deviation (total risk) as its
measure of risk so can only be used with either fully diversified or nondiversified portfolios
Benefits of Buy and hold ANS returns at least as good as strategies based on technical analysis, low
transactional costs, the deferral of capital gains taxes on profits, not missing the best days of the market
Property' value ANS NOI/Cap Rate
Typical hedge fund fees ANS annual management fee (typically around 2%), most have incentive (performance)
fee between 10 and 20% of the funds profits. The term "2 and 20" would refer to a 2% management fee and 20%
profits going to hedge fund manager. there can be a hurdle rate that the fund manager must surpass in order to earn a
performance fee. also can be a surrender fee when the fund is sold.
Major risk in hedge funds ANS illiquidity, manager risk, investment strategy risk, headline/regulatory risk, and
the risk that there may be adverse tax consequences
Market directional ANS includes equity long/short, short-selling, and activist
corporate restructuring ANS includes distressed securities, merger arbitrage, event driven, and regulation D
offerings
convergence trading ANS includes fixed-income arbitrage, convertible bond arbitrage, equity market-neutral,
and relative value arbitrage
opportunistic trading ANS includes global macro funds and fund of funds
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