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#1
04-12-2018, 07:31 AM
 arto83 Member SOA Join Date: May 2005 Location: New York College: Brooklyn College Alum Posts: 546
arto83's FA thoughts after 4th attempt MMR

Here is the first batch of my thoughts from my 3 fails to my MMR. This is task 2,3,4.
FWIW, my first attempt was Feb 2016, and my last 3 were in feb/march 18. The last 3 were identical pdf to the 't'. The spreadhseets returned slightly different results. From attempt 1 to 2 they added a question to task 2, and 3 i believe.

Huge thank you to Sir Isaac and ao_fan for their help and patience!

Question 1

Clarified my answers and was more specific about what the different metrics are. I quoted a couple of resources. Talked about each metric on it’s own and what other metrics it works well with (e.g. mean with standard deviation). Discussed how some can be combined to form a new metric

Question 2.

Specifically related to and quoted the goals of the CDEF. I used Sharpe ratio, and quoted from online about what it is and explained how this one is different from standard sharpe – uses tax instead of actual return. I explicitly explained what was in the numerator and denominator and how the numerator reflected an objective return and denominator an objective risk measurement.

I explained what I was looking for with Sharpe ratio (highest ratio), and why I wanted that. I explained what I used as the “risk free rate” and why I chose that number. I explained why the value with highest numerator isn’t ideal (using other metrics in the spreadsheet), and how the denominator corrects for this.

I set a baseline minimum treasury and maximum equity allocation ( I used the same spread at the end of the day as my 3rd, failing, attempt – I just was much clearer in my explanation). I explained why I needed a floor of treasuries and a ceiling for equities and tied those to the goals of the CDEF. I did not explicitly explain my actual numbers, just the reasoning that I had to pick some.

Question 3

Did not justify optimistic or pessimistic scenarios other than ability to take more or less risk. In optimistic market my treasuries were below the floor mentioned above and the equities above the ceiling,

Question 4

I picked one of the metrics as tax rate and explained logically why I felt it to be fair.

I recommended adding 2 of the assets, as well as my new asset class and the asset team. I tied the asset team and new class together, using them to support each other. I found educational endowment reports very helpful in finding a new asset class.

Varied every variable by a small %. One change I made this time was that in other versions I changed the new hire or new unemployment rate (150,000 up or down by a specific percentage). In this one I ignored the specific increase or decrease and changed the actual employment numbers (6m up or down). The difference is changing the actual. Number vs changing the change. The former is what I did with other items, so I wasn't being consistent by changing the change in employment.
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#2
04-12-2018, 09:02 AM
 mel.fel Member SOA Join Date: Feb 2017 Posts: 305

Perseverance points to you sir for battling through 4 points!
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