Interview question

[newwurldmn]

Quote from Soon2Bgreat:

A fair point - though in reality ET provided much more pragmatic answers than what was discussed during the interview. They had zero interest in discussing the impact of the drawdown or reasons why, kind of boring.

What type of job were you interviewin for? and what type of firm?

For example, at a bank prop desk I doubt they would care about the loss of investor capital due to redemptions.

 

[Soon2Bgreat]

Quote from newwurldmn:

What type of job were you interviewin for? and what type of firm?

For example, at a bank prop desk I doubt they would care about the loss of investor capital due to redemptions.

It was a traditional invstmntmgmt place (think AllianceBernstein, BlackRock, Fidelity, etc.) - the PM managed a global equity book (value iirc) and it was an entry level associate role.

The irony of it is at the time they were only a few months away from such a drawdown. Though, afaik, these kinds of drawdowns happen and aren't too detrimental given the nature of that business.

 

[SimpleTrades]

Something just occurred to me:

Why settle for a pairs trading system? Why not a trio or a quartet? I mean the logic is so simple. Even a beauone head should be able to understand this. Of course, it would help if you had a minor in math and a completed CFA 1, but I'm certain the small people on ET can understand this.

By the way, the WORLD IS FLAT! THE WORLD IS FLAT! THE WORLD IS FLAT! I know this! I proved it with my degree in Math! Come on little people on ET, just google it! Its right there for you to see!

 

[cyoungmark]

Quote from bwolinsky:

You are wrong, Cy young.

I am not wrong. It's common sense. Obviously with a little amount it won't matter, but if your managing a big portfolio it's a big difference

 

[shopster]

would you rather A) gain 20% for 4yrs and then lose 50% in the fifth or B) lose 50% in the first year and gain 20% for the remaining four years.

.........................................

being married at the time, it would depend on what she looked like.

margin requirements, investor confidence, 2 and 20% / maint. fees also come into play.....

s

 

[newwurldmn]

Quote from Soon2Bgreat:

It was a traditional invstmntmgmt place (think AllianceBernstein, BlackRock, Fidelity, etc.) - the PM managed a global equity book (value iirc) and it was an entry level associate role.

The irony of it is at the time they were only a few months away from such a drawdown. Though, afaik, these kinds of drawdowns happen and aren't too detrimental given the nature of that business.

it's 95% beta anyway.

 

[masterm1ne]

Quote from S2007S:

Take a $1000

A.
1000 X 20% = 1200
1200 X 20% = 1440
1440 X 20% = 1728
1728 X 20% = 2073.60

2073.60 X 50% = $1036.80

B.
1000X 50% = 500
500 X 20% = 600
600 X 20% = 720
720 X 20% = 864

864 X 20% = $1036.60

Thats apparently the case....its extremely straight forward.

God no.... 720 X 20% = 864 ???

Quote from bwolinsky:

All right. I don't know why what I was doing didn't work like that, but they are the same. Done it twice in my calculator in addition to an e-mail.

Case A:

Start with $1000
End of year 1 you have: $1000*1.2 = $1200
End of year 2 you have: $1200*1.2 = $1440
End of year 3 you have: $1440*1.2 = $1728
End of year 4 you have: $1728*1.2 = $2073.6
End of year 5 you have: $2073.6*.5 = $1036.8


Case A:
Start with $1000
End of year 1 you have: $1000*.5 = $500
End of year 2 you have: $500*1.2 = $600
End of year 3 you have: $600*1.2 = $720
End of year 4 you have: $720*1.2 = $864
End of year 5 you have: $864*1.2 = $1036.8

Sure, use X * 1.2 instead of: X[1] = X[0] + (20% * X[0]) for clarity..?

Quote from 1a2b3cppp:

Start with $1,000.

Example A:

After year 1 you have $1,200 (20% gain)
After year 2 you have $1,440 (20% gain)
After year 3 you have $1,728 (20% gain)
After year 4 you have $2,073.60 (20% gain)
After year 5 you have $1,036.80 (50% loss)

Example B:

After year 1 you have $500 (50% loss)
After year 2 you have $600 (20% gain)
After year 3 you have $720 (20% gain)
After year 4 you have $864 (20% gain)
After year 5 you have $1,036.80 (20% gain)

Third times a charm!

 

[doublet83]

Bwolinsky's mistake is a good example of the dangerous of intuitive thinking. He looks at the problem and immediately thinks "must be a trick question." He's been studying a lot of CFA material recently, and thinks, ah, must be an issue of compounding.

This leads him to a biased, intuitive conclusion that one result must be greater than the other, and he creates a flawed mathematical formula to prove it, not realizing that dividing by 1.5 does not equal a 50% loss.

Irony is that most middle school math students probably would be able to tell that the two scenarios produce equal results.

 

[bwolinsky]

Think it was early AM when I posted that. Too early for me to think clearly.

 

[SimpleTrades]

Quote from bwolinsky:

Think it was early AM when I posted that. Too early for me to think clearly.

Nonsense. Your ego got in the way. "I'm a CFA canidate!!! (Nobody else knows but me)" mentalty. You overlooked the obvious because you were being an arrogant know it all.