August 2008
- JAI Featured Article:
"Are the U.S. Stock Market and Credit Default
Swap Market Related?
Evidence from the CDX Indices"
- CAIA Poll: The Oil
Rollercoaster
- CAIA
Global Chapters: Frankfurt, London and Madrid
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Unblurring
the Lines
This month our collective eyes are trained on Beijing as world-class athletes from across the globe take center stage. Every four years the nations eagerly anticipate this gathering of the most elite competitors. However, the honor and the pageantry of the athletes’ achievements is already being undermined by conjecture about underage athletes and continuing concerns over the use of performance-enhancing substances.
The International Olympic Committee (IOC) is facing an unprecedented level of scrutiny as they work to maintain, or some would say re-establish, the integrity of the Games. “Win at any cost,” has seemingly become the mantra of athletes everywhere and no sport has escaped unscathed.
International cycling is still reeling from the fallout of Floyd Landis being stripped of his Tour de France title in 2006. Italy’s Riccardo Ricco tested positive this year. Carlos Gurpegi, midfielder for Athletic Bilbao of Spain, was banned from professional soccer for two years in 2003 after testing positive for an illegal substance.
Perhaps most notoriously, American Marion Jones was stripped of the five track and field Olympic medals that she won in the 2000 Olympics in Sydney. Turns out the fastest woman in the world had pulled a fast one on both regulators and fans and is serving six months in prison for her efforts.
The real tragedy within any organized sports body is that we will never know whose performances were artificially enhanced and whose performances were not. This has never been more evident than in the current melee swirling around major league baseball in the US. I like to think that only a fraction of professional athletes are playing outside the law, but it is unquestionable that entire sports franchises can become humiliated by the actions of a few. In the shadow of Congressional hearings and government inquests, some players continue to quietly excel on the field and never touch performance-enhancing drugs.
The situation in professional sports is not so different from the alternative investment industry. Ask the everyday investor what he or she knows of hedge funds and you may hear them recount the story of a disgraced hedge fund manager faking a suicide and roaming across the US in a motor home with US$450 million of embezzled assets under the hood.
These are the stories that capture the headlines—the swindlers who find and exploit the loopholes in our regulations. In so doing, they defraud their clients, their peers, and their profession. The athlete engages in illegal behavior ostensibly to help his team; likewise the financial elite rationalize their behavior as imperative to gaining a competitive advantage for their firm and clients. In both cases, the clear motivating factor is really personal gain.
Even here, I have devoted the majority of our discussion to the few who have fallen rather than giving credit to those who proudly operate within a legal framework. I know that most practitioners are committed to conducting business in accordance with the CAIA Code of Ethics. But in a profession where the lines between the ethical and unethical can be blurred, navigating the murky waters of temptation requires clear standards and guidelines.
I wish that The Wall Street Journal, or the Financial Times would make time to honor the 99.9 percent of our industry that does play by the rules; some even subscribe to a higher code of conduct than the law requires. But I’m afraid that such waiting would be in vain. Miscreants almost always commandeer the spotlight.
In the meantime, to the unheralded professionals in our industry whose accomplishments are untainted, you are deserving of our thanks. We cannot offer you a world stage or a glittering medal, but our eyes are trained on you: the best and the brightest the alternatives industry has to offer. We applaud you.
Best regards,
E. Craig Asche
Executive Director
September
2008 Exam Update
September 2008 Exam Registration Now Closed
Exam Appointment Scheduling: CAIA candidates who have not yet scheduled an exam appointment are encouraged to do so as soon as possible. All exams are scheduled directly through Pearson VUE. If you encounter any scheduling difficulties, please contact Pearson VUE immediately.
REMINDER -- CALCULATOR POLICY:
Only the TI BA II Plus (as well as the Professional model) or the HP
12C (as well as the Platinum edition) are allowed during the CAIA
exams. No other calculators are allowed in the testing
room. There are no exceptions to this policy.
As in the past, exam proctors will require that all calculator memory
be cleared prior to the start of the exam.
Formulas/Equations:
All formulas listed in the Study Guide will be available as a computerized exhibit (i.e. a pop-up window) during the exam. The September 2008 exam period marks the first time the formulas are being provided as an exhibit during the exam. They did not appear on previous exams.
Identification Requirements: You will not be allowed into the testing room without the proper identification. Please review the ID policy here.
Registration for the next exam period (March 09 –
20, 2009) opens October 1, 2008
JAI Featured Article
This article examines the market-wide relations between the U.S. stock market and the credit default swap (CDS) market for the period 2001-2007. Results indicate that the lead-lag relationship between the U.S. stock market and the CDS market depends on the credit quality of the underlying reference entity. Specifically, this article finds significant mutual feedback of information between the stock market and the high-yield CDS market in terms of pricing and volatility, while the stock market leads the investment-grade CDS index in the pricing process.
The CDS market seems to play a more significant role in volatility spillover than the stock market. That is, volatilities of both the investment-grade and high-yield CDS indices seem to lead the stock market volatility, while the latter has a feedback effect to that of the high-yield CDS market only. Overall, the implication is that market participants should seek information in both markets when they are about to engage in trading and/or hedging.
This quarter's highlighted article, "Are
the U.S. Stock Market and Credit Default
Swap Market Related?
Evidence
from the CDX Indices
", is only
available to JAI subscribers and through our website.
CAIA
Chapters Around the World: Frankfurt, London and Madrid
FRANKFURT: CAIA members and
candidates met for the latest CAIA Stammtisch on
Wednesday, 13 August 2008 at Neuer
Volkswirt.
LONDON: Members and candidates in
London met for their monthly social on Monday,
18 August at Mulligans of Mayfair.
IBERIA: We are very pleased to announce
the official
launch of the CAIA Iberia
chapter! On Friday, 3 October 2008 at 6 pm
we begin with a keynote presentation by Gabriel
Fernández de Bobadilla of
Omega Asset Management, Jesús Mardomingo of
Cuatrecasas and Sasha Evers
of Bank of NY Mellon.
The evening's festivities will end with a formal presentation
of the chapter by Sergio Miguez, a brief
presentation by CAIA Association Executive Director Craig
Asche and a cocktail reception. Members and candidates
are encouraged to attend.
As word of the CAIA designation continues to spread, we're receiving
many inquiries about new chapters in various parts of the world. Stay
tuned for exciting news as new CAIA chapters are formed!
CAIA
On the Road Around the
Globe
CAIA is back on the road and has a full itinerary for the next
three months. We are looking forward to meeting our members and
colleagues in the following cities:
August
Europe: Switzerland 13th - 15th
Asia: Korea 26th & 27th, Taiwan 28th & 29th, Hong Kong 30th
September
Asia: Singapore 1st, Manila 2nd
Australia: Melbourne 1st and 2nd, Sydney 3rd - 5th & Brisbane on the 8th
Europe: Stockholm 22nd, Oslo 23rd, Helsinki 24th, Munich 29th, Luxembourg 30th & Oct 1st
October
Europe: Madrid 2nd & 3rd, Stockholm 20th & 21st, Oslo 22nd & 23rd , Copenhagen 24th
The Association is available to give private, on-site
presentations of the CAIA program in each of these cities. These
presentations are an excellent way to increase your company's awareness
of the value of the CAIA program, as well as to highlight your
significant achievement in earning the designation.
Contact events@caia.org
for more information on planning an exclusive informational meeting for
your colleagues.
We look forward to seeing you while we are on the road!