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CFA Updated
When is paid research still considered public information?
Yes, it can still be public if it is broadly available on equal and legitimate terms. The fact that a data feed is expensive does not automatically make it nonpublic. Think about **Blue Mesa Analytics**, a subscription platform that sells shipping an
How should I think about the test statistic instead of just memorizing the formula?
The test statistic tells you how far the sample result sits from the null-hypothesis value after adjusting for normal sampling noise. In plain language, it answers: "How surprising is this sample if the null world is the one we live in?" Suppose fict
Why does a large p-value not mean the null hypothesis is true?
Because the test is designed to evaluate whether the evidence is strong enough to go against the null, not to prove the null is correct. A high p-value means the observed sample would not be unusual if the null hypothesis were true. That is much weak
How do you remember Type I versus Type II error without second-guessing yourself?
Start with the action, not the Roman numeral. - Type I error: you rejected the null hypothesis, but the null was actually true. - Type II error: you failed to reject the null hypothesis, but the null was actually false. A practical way to anchor it i
When exactly am I supposed to reject the null hypothesis on CFA Level I?
The cleanest way to think about rejection is that you are testing whether the sample evidence looks too extreme to be consistent with the null hypothesis. Use one of these equivalent rules: - Critical-value method: reject the null if the test statist
When should I use key rate duration instead of the regular duration number?
Use key rate duration when the risk is tied to one part of the yield curve rather than a uniform shift across maturities. Example: - **Eastbank Pension Fund** owns a bond portfolio with large exposure around the 10-year maturity point. - The manager
Why does a higher-coupon bond usually have lower duration even when maturity is the same?
Duration falls when more of the bond's economic value arrives earlier. Compare two 5-year bonds from **Norcrest Logistics**: - Bond A coupon: `2%` - Bond B coupon: `8%` Both mature in 5 years, but Bond B pays larger coupons along the way. Those earli
Why is modified duration a bad choice for a callable bond when rates move?
Modified duration assumes the bond's expected cash flows stay fixed when yields change. A callable bond breaks that assumption. Suppose **Red Harbor Telecom** has a callable 9-year bond. If market yields drop, the issuer becomes more likely to refina
How do I know when the exam wants Macaulay duration instead of modified duration?
Ask what the question is requesting before you think about formulas. - If it wants the weighted-average time of promised cash flows, use Macaulay duration. - If it wants approximate percentage price change from a yield move, use modified duration. Qu
Why is modified duration still reported in years if I am using it to estimate price sensitivity?
Treat modified duration as an approximate percentage price sensitivity that is built from a time-weighted bond structure. That is why market tables may still display it in years even though the operational use is: `Approximate % price change = - Modi
Why does a callable bond break the normal duration shortcuts I use for straight bonds?
The shortcut fails because the bond's expected cash flows are no longer fixed. When yields fall, the issuer becomes more likely to call the bond. That shortens the expected life and caps some of the upside price gain.
Is immunization basically just matching my bond portfolio duration to the liability horizon?
Duration matching is necessary, but it is not the whole immunization story.
How should I read a key rate duration table without memorizing every single maturity point?
Read a key rate duration table as a map, not as a formula sheet. Each entry tells you where along the curve the portfolio is most vulnerable.
Why can a bond portfolio still lose money after I match its duration to the benchmark?
Matching aggregate duration only hedges a small parallel shift reasonably well. It does not guarantee protection if one part of the curve moves much more than the rest.
Why is convexity not a free lunch on a static yield curve?
Your skepticism is correct. Convexity does not generate return by itself in a completely motionless market. The more defensible interpretation is that convexity becomes valuable when yields fluctuate over time, when the manager rebalances, or when th
What does the convexity effect actually mean for equal rate moves?
There is a clean way to think about it. Positive convexity means the bond price-yield line bows outward. Because of that bow, a yield decline lifts the bond price by more than a yield increase of the same size pushes it down. If you imagine duration
How does convexity change a duration-based price estimate?
Duration gives a linear approximation. Convexity adds a curvature adjustment. If the yield move is tiny, the adjustment is often negligible. As the yield move becomes larger, or when answer choices are close together, the convexity term can change bo
Why does a barbell beat a bullet when duration is the same?
Matching duration only aligns first-order interest-rate sensitivity. It does not guarantee the same second-order sensitivity, which is convexity. A barbell spreads cash flows across shorter and longer maturities, so it often has more convexity than a
what are factor tilts and how can they improve portfolio returns
Factor tilts refer to the practice of tilting a portfolio towards specific factors that have been shown to provide a risk premium, such as value, momentum, quality, low-volatility, and size. <video co
what is the default approach to equity management at cfa level iii
The default approach to equity management at CFA Level III is broad market index exposure. This is because active equity management has a low base rate of success after fees, especially in large-cap U
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