Derivative problem

[Ben Jones]

Hey all,

About to lose my mind with schweser.  Please help me out.  Look on page 16 of schweser book 5(deriv).  It explains the value of long and short positions on a forward contract. it says the long position will pay the FP at maturity and receive the Spot.  On CFAI eoc question #1 for reading 54, the solutions show that the FP is equal to $1030 and Spot 1000. Then it says because value is negative the short must pay the long.  My questions is if the FP is what the long would pay and the Spot is what receive, why isnt the long making the $30 payment???  I may have overlooked something really simply here, but i cant seem to fig it out.  Looked on errata and not there.

Thanks

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Ben Jones

[My Gmail]

I dont use schweser but the principle is that: most valuation formula for forward in CFAI text is value to the long position. If it is negative, long pays i.e short benefits. Positive, short pays i.e long benefits

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[Ben Jones]

I get what you're saying and that's what I thought, but in the 1st problem of CFAI reading 54, the value is negative and it says the short pays the long. 

--

Ben Jones
5210 Milam St.

Dallas, TX 75206

(214) 600-9012

[My Gmail]

Oh, I checked.this is off market forward, value at inception is not zero. You can long (buy) this forward for negative money i.e receive money from the short. We are not talking about settlement at some time later

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[Ben Jones]

Okay, i was wondering about the off-market thing.  Thanks

[Laura Noonan]

Is it not just if the value of the underlying asaet falls the short wins and if the value rises the long wins? 

[Bryon Gmail]

I think the principle guiding pricing and valuation is arbitrage free. What you said seems right but how to apply to FRA, currency not to mention bond and stock + time value of money

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[Laura Noonan]

How much weight would you guys put on the CFA mock score? Did morning one earlier and got 65, well below my last Schweser (78)

On Tuesday, May 29, 2012, My Gmail wrote:

[adam johnson]

Honestly, I would put much more weight on the CFA mock. I thought the 2012 mock did a great job of testing a wider range of skills than the Schweser exams. My Schweser exam scores varied a great deal. 

I just took the 2012 mock yesterday and scored 65% on AM and 67% on PM. I read on Analyst Forum that 62% is a more accurate passing number on the real exam than 70%. I have no idea whether or not this is true.

I am going to continue attacking my problem areas over the next couple of days. I am getting quite nervous!

[Laura Noonan]

Got 70 on the cfa pm, but managed to screw up four ethics questions. Feel like I will never get to grips with research and objectivity standards and all the rules around them.

[Shreyas Tonse]

Just did CFAI mock 2012 AM and scored 75% 

Totally bombed the first FRA case, and a few silly errors at other places

For those who've done the PM, did you feel it was easier than AM? Keeping it for tomorrow 

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[My Gmail]

I just did cfai sample exam v1 online, ran out of time on the last case. Scored 72%

The case on Private company valuation took most of my time. It was a good one. Worth 40$

 

I'm saving 2012 mock for tomorrow

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[Laura Noonan]

75 is great for the am, I found the pm easier, got 70 in that, so you'll probably come in around 80! 

[Ben Jones]

75% very good.  Just took the whole thing today.  Not any improvement but still hope to be a passing grade.  Got 67% on AM, 69% PM.  

Did not feel PM was any easier/harder.  I gotta tackle this ethics crap, somehow I've managed to get worse every mock I take.  Got 7 out of 12 wrong.  Gonna be ethics, fra, equity from here on out...

[Shreyas Tonse]

Finished the 2012 mock PM with 50/60

But was hard pressed for time and screwed up on one of the FRA cases again.

As Ben says, going to review the big 3 till test day now. All the best folks.

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[Laura Noonan]

I think we can safely say you're through, congrats! Just did yet another Schweser mock, 75, by the last section I was so past caring I didn't even bother trying to figure stuff out. So much left to do but my brain is turning to mush. Wondering if I should ease up a bit now do I dont still feel like this on Sat, but then I remember how much I still have to study and freak out 

[My Gmail]

I finished 2012 AM mock at 72%, totally missed the 2 FRA cases scored 3/12 + my worst ethic so far

I'm planning on speding Friday with ethics and EOC FRA + equity

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[Sonal Thakor]

Wow Shreyas, 50/60 . . . I applaud your score. You can rest easy. 

[Laura Noonan]

If you could ease off now and not move the curve for the rest of us that'd be much appreciated :) 

[My Gmail]

Just finished the CFAI afternoon mock 2012 at 80%, the FRA on intercorp investment got me again, guess I don't know deep enough.

Maybe I should go out and watch MIB3 to relax

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[Laura Noonan]

Feel like I'm the only one not up in the eighties by now, just struck out of a Schweser mock with 72. Only one vignette through me, the rest was mainly silly mistakes, not reading things properly etc. Not sure if I should do more mocks tomorrow or not, I was much happier earlier in the week when I was scoring higher, another bad mock might finish me off confidence wise. 

[Frank Jiang]

I haven't got the chance to do 2012 mock. :( Also many topics I know
I need to go over ....

[Frank Jiang]

Still at office... I should have asked for more PTO. Just finished
CFAI 2012 AM. The FSA stuff is killing me, totally blow up two
questions, managed to get 70%. 10 min overtime.

[My Gmail]

Check the errata for mock. I got one more qn right for the AM.
Also the afternoon session about the bond amortization.

In case you guys wonder because I did.

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