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Learning Outcome Statements PDF Download
|1. Arbitrage pricing theory|
a. describe arbitrage pricing theory (APT), including its underlying assumptions and its relation to multifactor models;
b. define arbitrage opportunity and determine whether an arbitrage opportunity exists;
c. calculate the expected return on an asset given an asset's factor sensitivities and the factor risk premiums;
|2. Factors and types of multifactor models|
d. describe and compare macroeconomic factor models, fundamental factor models, and statistical factor models;
|3. Multifactor models: selected applications|
e. explain sources of active risk and interpret tracking risk and the information ratio;
f. describe uses of multifactor models and interpret the output of analyses based on multifactor models;
g. describe the potential benefits for investors in considering multiple risk dimensions when modeling asset returns.