wanganjie

 

The correct answer is D

High values of positive autocorrelation is an indication of illiquidity exposure, which would create low values for the standard deviation and therefore overstate the Sharpe ratio.

wanganjie

 

The correct answer is B

Capital Decimation Partners, CDP, strategy of writing out-of-the money puts is most similar to selling insurance. A perfect market-timing strategy is consistent with the CMP strategy. The CMP strategy is a protective put strategy that involves a long position a put option on the underlying asset, and the underlying asset (S& 500), which is the same as buying insurance.

wanganjie

 

2、The Capital Multiplication Partners hypothetical strategy is least similar to which of the following:

A) Buying insurance.

B) Selling insurance.

C) A perfect market-timing strategy.

D) A dynamic asset allocation strategy.

wanganjie

 

The correct answer is B

Capital Multiplication Partners, CMP, is a hypothetical perfect market strategy that is also a dynamic asset-allocation strategy. The CMP strategy has been proven to be the same as holding a long position in the S& 500 and a put option on the S& 500 with the strike price equal to the Treasury bill rate. Buying a put when owning the underlying asset is equivalent to buying insurance. The CDP strategy of writing out-of-the money puts is the most similar with selling insurance.

wanganjie

 

3、Which of the following is a perfect market-timing strategy?

I.           Capital Decimation Partners.

II.         Capital Multiplication Partners.

A) I only.

B) Both I and II.

C) Neither I nor II.

D) II only.

wanganjie

 

The correct answer is D

Capital Multiplication Partners, CMP, is a hypothetical perfect market strategy of always investing in the asset that generates the highest return each month.