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Hi As you say, there are no ActEd ASET or revision book products. There are simply not enough students do SA7 to warrant these products. The...

The profession state that the papers are flexibly marked, even though it doesnt say it specifically on the Ex Report. But I hear what you say,...

It is sometimes worth communicating these frustrations to the IFoA who will pass it to the SA7 examinations team. Without hearing these opinions,...

Hi, This is a tricky one for me as I have never worked on the liability side or indeed on Solvency II. It sounds like you know more than you...

This was an unusual revaluation question - the first of its kind I think. You are right that when a property is revalued UP the profit does not...

I think the study hours is mentioned in the following IFoA doc:...

Hmmm. Good point. I can answer your point below the numbered questions first: no, there have never been any SA6 or SA7 questions that ask for...

A counterparty to a swap would usually want to cover their risks, which often means buying the physical asset that they have agreed to pay the...

I would separate government stimulus from QE. the first is when a government overspends, and it boost the economy. If a government taxes less...

Hi, This would be a big topic. Too big to add to a thread I think, as I would be writing for days. Stimulus packages have a big impact on...

Hi, We at ActEd couldnt comment on hypothetical situations here as we are not making the rules. What I mentioned above was that it is unlikely an...

The number calculated in part (iv) is just an expectation based on the asset allocation decision alone. It is not useful to calculate a...

There is advice on how to use excel on the professions website. It should not be more difficult to produce a table of results in word than it was...

Lets hope that when / if it comes up, the examiners are kind enough to use an annual paying bond :) PS, it has never been tested in ST5 or SP5...

Sorry: P = (C/2)*( (1+(i/2)^-1 + (1+(i/2)^-2) + ... )

Hi, The key is that, if a bond had semi-annual coupons, we would refer to its yield using a semi-annually compounding rate. So if such a bond has...

In theory - yes. SP5 gives you the formula for the "no arbitrage" fair price for a forward on an asset paying interest. F = S * exp(r-q)T So...

Your logic has a flaw. The spot transaction and the forward transaction basically get you the same thing in the end, therefore they are just...

Hi, I would say you were bang on in your description. If an institution buys overseas assets, there is a natural inflation hedge. As you say,...

Hi The rationale is that if an investor has signed up to a series of LIBOR payments over the next (say) 5 years, they can arrange a series of FRAs...

The examiners result is obtained by taking the index prior to the change of player (106), making a change to reflect the substitution (106 -4 +6 =...

Hi, Yes, I would agree. Its a funny sentence that one. Hedging can hedge all sorts of risks, including market risk. If the exam asks for a...

Hi, Whew - that goes back a bit! Yes the examiner mentioned that the yield ratio was high, which I think means that the yield of the equity...

This very much depends on your SP5 knowledge. If you covered the material recently, and attribution, MWRR, TWRR, risk adjusted returns, VaR...

Hi I probably can't help much here unfortunately. I was an active manager, but we didn't use multifactor models to helps us. Nor did we use the...

It is usually referring to the government yield curve. Otherwise the examiner will call it the AA corporate bond yield curve for example.

Hi, I must admit that I also got a variety of different answers for this one (most of which were a bit higher than the examiners). It depends on...

Dividend discount model (DDM) is maybe one tool that can be used in fundamental analysis. It uses growth of dividends as an input, which would...

"Value investing" - buying securities that an investor believes are underpriced by some form of fundamental analysis. (ActEd, 09/2020) (This seems...

Hi, I wouldnt have said that growth shares cannot be selected using fundamental analysis. FA is basically looking at the fundamentals of a share...

Yes. If manager A gets (say) Rp - Rf = 4% and has vol = 2% then they have a sharpe of 2. If manager B gets Rp - Rf = 2% and has vol = 1% then...

Hi. This is quite an unusual chapter in the course. It is one of the least examined, as can be seen from the ASET cross reference grid which...

Hi, This does sound a bit odd, and you should certainly be able to access all of the sessions, audio + video, using the login and password sent to...

I agree that it is a tricky bit to fully understand. As you say, the repurchase price is set, and the repurchase of the gilt would not normally...

I think a yield surface is a three dimensional shape where bonds are shown by term and by coupon (X and Y) and the GRY is plotted as the Z axis....

Hi, My feeling is that you should probably not think of these sections as just being for the two situations you describe (private investor...

Yes, as you mention, it should indeed by steeper on the negative side than the positive. I will see if our chart drawing skills are up to the...

I havent seen a version of prospects theory where the graph is extended/amplified on the negative side as you have done above. It has always been...

I certainly agree that this level of detail is unlikely to be required for SP5. But I think we are actually saying the same thing in different...

Hi, You have obviously done a fair amount of background on this. I will give you my spin on it all. Firstly I disagree that the figure on pg5...

Yes, I suppose it does. If you use the final value you are exposing the fund to its actual performance during the period. If you use the start...

In this case, we were not sure why the examiners did not accept the alternative formula, as they both seemed fine to us. The first thing is that...

You may be overthinking. the bond is still the possession of the original bondholder. They pay the premiums on the CDS to the SPV and unless a...

Hi, The risk budgeting process would be complex in reality, rather than the simple steps that are in the course notes, and every consultancy would...

It is hard to answer for large institutional investors, because I suspect they all have their own methods of performance reporting and...

Doing SA7 and SP5 together is perfectly possible, particularly if you have covered the SP5 material (and numerical techniques, eg attribution,...

I don't actually know of a book that I can say uses the SP5 methodology, nor am I certain that the SP5 examiners use a particular methodology from...

Over the medium to longer term however, any initial fall in value as interest rates rise is mitigated as revenue from the underlying asset grows....

I agree that the notes are not that clear when it comes to the exact minimum requirements. It is probably due to the fact that the Basel...

Glad to hear that my Mocks are challenging.

Hi, It is a tricky question, but like many questions in SA7, they can be quite unique. Its hard to find a question in past exams that matches up...

It does look odd. Usually bonds are quoted as a price per 100 nominal, rather than a price per £1 nominal. So 116, rather than 1.16. But when...

Hi, This is an odd one, and is in the core reading in chapter 17. Even google isnt sure what these are. There is some information in another...

One issue is that part (i) is all about why QT leads to assets prices falling, and covers economic factors, money supply .... So your answer to...

I think that gives us a pretty accurate estimate!?

The only thing you are missing is the "corrections" doc which is on the ActEd website. (products / core materials / corrections) The SA7...

Hi, Yes this is intended to be an example of a long/short trade. Quite a complex one to be honest. My feeling is that this involves taking a...

Hi, I am not sure how that "reverse" crept in there. It must have been there for years without anyone mentioning as it was in SA6 prior to SA7....

The swap has been treated as a fixed coupon 10 year bond with a coupon of 1.8% and a floating rate bond. the duration of the fixed bond has been...

The option to extend is with the issuer not the investor, so it is an option "against" the investor. If rates are higher the issuer will extend...

I am not sure I understand the question. In Q18.3 you are given the standard deviation of all three assets, those being 10%, 5% and 5%. the...

Options hedge downside risk only. Futures and options can completely hedge exposure in both directions. They are covered in the portfolio...

Ahh I thought you were using the examiners past paper solutions. the revision booklets have a term "passing it on" which refers to the fact that...

Hi, I cant find any reference to what you discuss here in the question. Have you got the wrong exam question in the text?

I agree that the two concepts are very close - indeed in later subjects such as SA7 they are almost always used interchangeably. I havent seen an...

I think the examiner just meant that there is a reduction in the tax charge.

The question indicates that automobiles ARE depreciated: Depreciating assets (includes automobiles) can offset 25% of value from any tax payable....

This relates to material on mergers and acquisitions that was removed from the course. It is not relevant for the current study session.

Your question is not clear: I think you missed a word "is the coming from .."

Aargh. I will circulate a note again and try to ensure that it is updated next time. Sorry.

I suspect there will be loads of references to "leverage ratio" but 99.9% of them will be in contexts that are irrelevant to the one in the...

The minimum number of shares is to spread the risk across a large number of holdings - diversification. The maximum holding in any share is to do...

By the way, this Q2 (iv) rather than Q1 (iv) for anyone viewing the thread.

Yes that does look odd. The only thing I can think of is that one says "governance efficiency" and the other says "governance improvements". So...

It does look odd. On a Treynor measure and on a Jensen measure HFY appears to outperform as mentioned in solution. But on Sharpe and Pre-Spec it...

Hi, I dont think there is really a great difference to worry about here. Certainly not at the level of an SP5 exams. Deduction seems to refer to...

Hi, probably legal costs and commissions etc are reduced by competition in developed markets.

Hi, I am not sure what your question is here.

Hi. I assume that you are looking at the solution in the revision booklets / ASET which separates the ideas into advantages and disadvantages....

The statement refers to the part in the core reading prior to the bit you have quoted in the question where it talks about the banks swap...

It means that the statement is not the case if either of the bank's clients defaults and does not honour their agreement with the bank.

This was a VERY odd and difficult question, relative to other ST5 questions. I think this part f the answer was the examiner giving examples of...

The revision booklets probably added it as it was considered to be an idea that is likely to score marks if a similar question was asked again. If...

Hi. The yield pick up is not anything complex. If you look to the right hand side it gives the yield of both bonds. 2.46% and 2.33%. You are...

Hi, I dont agree that rising markets would lead to falling margin. Margin accounts get boosted by profits when markets rise (you seem to suggest...

Hi A good example of closing out a position is in chapter 2 page 6. A trader would close out a position when he or she no longer wants the...

I think the revision notes have accidentally included the final table from method 2 at the end of the solution. The main solution uses method 1,...

I am reading some past papers and i see two "methods" for calculating the pv of floating payments in a swap. Within the "quicker" method if the...

Yes - the question was looking for reasons why you would buy the puttable swap, and one is that the swap give a yield pick up (which means a...

For part (ii) the examiner is giving a couple of reasons to enter the swap. One for risk mitigation. And one for higher return if there is a...

Hi. The question does not ask for a number of tables as such, but ActEd have broken the ASET solution down into a number of tables in order to...

Hi. There appear to be only 7 questions on this paper, numbered 1 to 7. Can you confirm what question this post refers to? There are no...

I am not sure which past papers you refer to. I wouldnt say that TWRR and LIRR are the same though. A TWRR breaks the period down into shorter...

That is quite hard because most books discuss older established concepts, whereas the things that can catch you out are current issues that havent...

Hi. I assume you mean SA7 above rather than SP7. You may want to read my response to a recent student in life insurance who was in a similar...

Happy Xmas.

Hi Yes this is an odd one. The answer says: Best execution risk [1] Swaps are typically traded over the counter and execution risk is therefore...

Hi, Glad you enjoyed ST5 (SP5) - you are certainly right that it helps with an SA subject to be working in the area. For SA7, the ideal field is...

Hi, I agree with some of what you say, but the solution does give a reasonable amount of information for the marks available, and most of it fits...