corridors

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florinpop

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gold= low correlation - narrow - but they were already smaller so I said same
fixed income - reduced volatility - narrow
emerging markets- reduced transaction costs- lower spreads - narrow?
 
Gold price increased - no effect on corridor
Reduced volatility - narrower
Reduced transaction costs - narrower
 
Dwight Wrote:
——————————————————-
> Gold price increased - no effect on corridor
> Reduced volatility - narrower
> Reduced transaction costs - narrower
I did not get the first one. It seems to me you gonna get 100%:0)
 
From the text:
Wider:
Price
High Transaction costs
High Correlation
Narrower:
High Volatility of asset
high Volatility rest of portfolio
 
I said:
Gold- no effect on corridors because simply an increase in an asset value rather than a change in asset characteristics like vol.
FI- lower volatility =WIDEN (which i’m sure about even though it seems counterintuitive)
EM- lower costs, narrower because positive cost/benefit to rebalancing from smaller moves.
 
isn’t reduced volatility = wider?
already starting to forget…nice!
 
i agree…….. gold no effect on corridor. gold going up is not increase in volatility.
 
Why would a price increase make the corridor wider? Just curious.
To me it would seem that the position may just need to be rebalanced. I mean prices are going to go up and down constantly - thus the need for a corridor…
 
i said for gold that price doesnt matter….its not one of the factors that affects the corridor width….
reduced volatility…wider….coz when volatility increases, you make the corridor narrower to identify problem sooner before it gets too late
reduce transaction costs…..narrower…coz when transaction costs are higher the corridor should be wider to justify the transaction in view of higher costs
 
If volatility increased, you would narrow. So why narrow if volatility decreased?? I said stay the same. I said gold neg correlated with stocks, so narrow. Wrong I think.
 
Gold price increased - no effect on corridor
Reduced volatility - WIDER (according to CFAI text)
Reduced transaction costs - NARROWER (accoridng to CFAI text)
 
gold commodity has negative correlation with the portfolio so when it increases, the others decrease => no effect
When the volatility is high, you want to narrow the corridor so you can quickly rebalance. If there is reduced volatility you can make the corridors wider.
Reduced transaction costs allow for narrower corridors since there is not as much of a price impact.
 
I actually think I said that lower volatility - widen corridor.
sorry
 
I agree with bhill, definitely right.
Posted by: bhill020 (IP Logged) [hide posts from this user]
Date: June 7, 2009 02:46PM
Gold price increased - no effect on corridor
Reduced volatility - WIDER (according to CFAI text)
Reduced transaction costs - NARROWER (accoridng to CFAI text)
 
Yeah I remember reduced volatility = wider now. Crap I hate that relationship it has thrown me several times and I didn’t remember it.
 
Squirrel24 Wrote:
——————————————————-
> isn’t reduced volatility = wider?
>
> already starting to forget…nice!
Reduce volatility means you do not have to rebalance as often, therefore, norrower
 
I chose
gold price - no influence
lower vol-> allowes wider corr
lower cost-> allowes more rebal->lower corr
 
Per schweser: “Volatility: Generally, the greater the volatility of the individual asset class, the tighter the corridor. Basically it amounts to the ability to detect the corridor violation and to be able to react quickly enough to avoid an even worse violation”.
ARGGHHH
 
Mandelbrot Wrote:
——————————————————-
> I said:
>
> Gold- no effect on corridors because simply an
> increase in an asset value rather than a change in
> asset characteristics like vol.
>
> FI- lower volatility =WIDEN (which i’m sure about
> even though it seems counterintuitive)
>
> EM- lower costs, narrower because positive
> cost/benefit to rebalancing from smaller moves.
Agree
 
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