Questions and Solutions for Quantitative Equity Portfolio Management by Ludwig Chincarini and Daehwan Kim

Questions Only > Questions and Solutions for Quantitative Equity Portfolio Management by Ludwig Chincarini and Daehwan Kim

Boston College MFIN 1151 QUESTIONS FOR CHAPTER 1 3 QUESTIONS FOR CHAPTER 1 1.1.Name three advantages of QEPM versus qualitative equity management. 1.2.Name three disadvantages of QEPM versus qualitative equity management. 1.3.Name four realistic investment situations in which a quantitative portfolio manager differs from a qualitative portfolio manager in his or her app ...[Show More]

Boston College
MFIN 1151
QUESTIONS FOR CHAPTER 1 3 QUESTIONS FOR CHAPTER 1 1.1.Name three advantages of QEPM versus qualitative equity management. 1.2.Name three disadvantages of QEPM versus qualitative equity management. 1.3.Name four realistic investment situations in which a quantitative portfolio manager differs from a qualitative portfolio manager in his or her approach. 1.4.In some ways, a qualitative portfolio manager could never really be an index portfolio manager, whereas a quantitative portfolio manager could be. Explain why. 1.5.What is factor tilting? What type of portfolio manager engages in it? 1.6.Fed fund futures are actively traded instruments on the Chicago Board of Trade. The contract is cash settled to the simple average of the daily effective Fed funds rate for the delivery month.Although the daily effective Fed funds rate is not perfectly equal to the Fed funds target rate, it is very close. Market practitioners use the Fed fund futures rate to gauge the market’s assessment that the Fed will change the Fed fund’s rate. Suppose that there will be an FOMC meeting 10 days into the current month. Use the following variables, i f t as the Fed fund futures rate, i pre t as the target rate prevailing before the FOMC meeting, i post t as the target rate expected to prevail after the FOMC meeting, p as the probability of a target rate change,d1 as the number of days between previous month end and the FOMC meeting, d2 as the number of days between the FOMC meeting at the current month end; and B as the number of days in the month. (a) Write down a general formula for the probability of an FOMC target rate change. (b) Given that the current target rate is 3.5%, the expected rate after the meeting is 3.75%, the Fed futures implied rate is 3.60%, there are 30 days in the month, and the FOMC meeting will take place on the tenth day of the month, what is the probability implied by the market prices that the Federal Reserve will raise interest rates?

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