In this clip from the CFA Level I Orientation, William A. Trent, director of the exam development division at the CFA Institute, offers 10 essential strategies that every student should follow when preparing for CFA exams. Though Trent warns students that earning a CFA can be a difficult process–with the global pass rate averaging only 40% for the June 2010 exam–he noted that "more and more CFA designation is held in high regard by employers."

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A reader left me a comment and suggested this interesting video about Ken Griffin.

Ken founded Citadel at the age of 22 with $4.2m. He started two funds from his dorm room at Harvard, and he claims that in between classes he would make trades. His first 'seeder' was Frank Meyer of Glenwood Capital who was amazed at Ken's success and his ROI. Frank provided $1m for Ken to invest while Ken was only 19, and the result exceeded his expectation.

Here is a video on Opalesque.tv in which Frank Meyer describes the keys of seeding new managers, as he did with Ken.

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Morgan Stanley Questions you must prepare for

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Goldman Sachs Interview Skills _Must see Video

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AIM: Relate the difference between true and risk-neutral probabilities to interest rate drift.

42.1 Assume a binomial interest rate tree where the six-month rate either jumps up 50 basis points or jumps down 50 basis points. The real-world (or “true”) probabilities are 50% and 50% for each up- and down-state. If the interest rate drift is +20 basis point under risk-neutral probabilities, what is the risk-neutral probability of an up-state (p)?

* a. 50%
* b. 60%
* c. 70%
* d. 80%

42.2 Which of the following is MOST essential to the argument that contingent claims can be valued with risk-neutral pricing?

* a. The no-arbitrage price is invariant to investor risk preferences
* b. The no-arbitrage price accounts for investor risk preferences
* c. Investors are risk-neutral in the imaginary world
* d. The discount rate impounds investor risk aversion

42.3 In regard to the valuation of contingent claims (derivatives) by risk-neutral pricing, each of the following is true EXCEPT for:

* a. Expected discounted value will equal arbitrage price
* b. We must assume the growth (return) on the underlying equals the risk-free rate
* c. The risk-free discount rate is appropriate
* d. The derivative price is the same in the imaginary world (risk-neutral investors) and the real world

Answers:

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