The CFA Level III Series: Table of Contents
Table of Contents Topics are presented in the order recommended by the CFA study sessions. Economics (Book 2) Capital Market …
Module 42.5 LOS 42.m: Financial ratios used to analyze private real estate investments
Lenders often use the debt service coverage ratio (DSCR) and the loan-to-value (LTV) ratio to determine the maximum loan amount on a specific property. …
Module 42.4 LOS 42.i: Valuing Real Estate Using the Cost and Sales Comparison Approach
Cost Comparison Approach Estimate the market value of the land. The value of the land is estimated separately, often using the …
Module 42.2 LOS 42.g: Direct Capitalization Approach
In the direct capitalization approach to property valuation, we discount or “capitalize” first year NOI by the capitalization rate. NOI …
Module 40.1-40.2: Option Binomial Trees
We can apply binomial trees to calculate the value of options. Options generate tree paths by the 2 states that …
Module 40.6: The Black Scholes Merton Model
The BSM model allows us to value options continuously in real time, as long as the no-arbitrage condition holds. The …
Module 37.3 LOS 37.c: Expected return on bond given transition in its credit rating
The change in price of a bond when it experiences a change in credit rating is dependent on the modified …
Module 34.1 LOS 34.b: Calculate forward and spot prices using the forward pricing and forward rate models
The forward pricing model states that two investors should be indifferent between paying P for a j+k year zero coupon, …
Module 34.1 LOS 34.c: Bootstrapping Spot Rates
We can derive spot rates from the par rate curve through a process called bootstrapping. Bootstrapping is in iterative process …
Module 37.1 LOS 37.a: Explain expected exposure, the loss given default, the probability of default, and the credit valuation adjustment
Expected exposure is the amount a investor stands to lose on risky bond before recovery amounts are taken into consideration. …