July 2014

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Immunizing a Bond Porfolio by Matching Duration and Convexity of Pension Assets and Liabilities

This post covers part of a Fixed Income March 2014 CIIA exam question that required the calculation of three weights (three unknown weightings) based on modified duration and convexity. The formula for portfolio duration is needed for equation (2) and the modified durations from the table (highlighted in yellow) as well as the modified duration for the liabilities (given; below the table) The formula for portfolio convexity is needed for…


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Put-Call Parity Theorem – Graphic aswell as Formula

Put-Call Parity Theorem – Graphic aswell as Formula The graph above is from the CIIA course book; used here for educational purposes. The above table (put-call parity equation based combinations) shows that we can price a call or a put based on the the instruments that make up its synthetic version. An example: Let’s take a 3m American put and a 3m American call on the shares of ABC Corp,…



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Active Funds worth the cost (TER) of over 1% – Example Classic Fund

The Classic Fund run by Thomas Braun and Georg von Wyss is an interesting example of an active fund that has beaten its benchmark over the last 10-15 years returning an annulised 10.5%. Although it got clobbered in 2007 and 2008, even vs the benchmark. It has underperformed in 3 of the 7 past years. The fund managers approach worked best in 2000 and 2001, which is probably one of…