ASET Sep 2022 Paper 1

[SYL]

Hi,

Can you please explain how "buy and sell" reflect in the calculations please? More particularly, I don't understand the exponent part of the calculations (Strategy B-D):
1. Can you explain the -1 in the exponent for Strategy B please?
2. For strategy D, in the VLOOKUP in the exponent, why are we looking the date of the day before? (In strategy B and C, looking at current date)

Thank you for helping with this.

Kind regards
Lai

 

[Lucy England]

Hi Lai,

There's a fairly detailed explanation of the logic for the exponent in Strategy B in the ASET solutions pages 8 - 9. This strategy is the opposite of Strategy C, which is reflected in the exponents of the formulae used to calculate the returns each day.

For Strategy D, I think the previous day's 'instructions' are picked up in this way due to interpretation of the background information on this strategy:

For this strategy, an initial position is taken based on the two moving averages on 2 January, and this position is re-evaluated each day thereafter.

So the first 'instruction' (buy / sell or +1 / -1) that's picked up and applied is the one from 2 January. However, I think it would also be valid to apply the 'instruction' from 3 January given that this picks up price data from 2 January and the previous 50 or 200 days, as appropriate. There are often areas that require judgement like this in the CP2 exam and the examiners will accept any logical interpretation of the instructions.

Hope that helps!

Thanks
Lucy