Evaluate Advanced Portfolio Strategies
Series 65 · Flashcards · Application
SERIES 65 · FLASHCARDS
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QUESTION
If
σ
target
=
10
%
\sigma_{\text{target}}=10\%
σ
target
=
10%
and
σ
realized
=
20
%
\sigma_{\text{realized}}=20\%
σ
realized
=
20%
, what is the scaling factor?
QUESTION
What is the expected daily return of a
3
×
3\times
3
×
leveraged ETF if the index is down
2
%
2\%
2%
?
QUESTION
What is the expected daily return of a
−
2
×
-2\times
−
2
×
inverse ETF if the index is up
1
%
1\%
1%
?
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ANSWER
−
2
%
-2\%
−
2%
(before fees and tracking error). Inverse leveraged ETFs aim for multiples of the negative index return on a daily basis.
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