For FRM (Part I & Part II) video lessons, study notes, question banks, mock exams, and formula sheets covering all chapters of the FRM syllabus, click on the following link: analystprep.com/shop/unlimite...
AnalystPrep is a GARP-Approved Exam Preparation Provider for FRM Exams
After completing this reading, you should be able to:
- Explain the Arbitrage Pricing Theory (APT), describe its assumptions, and compare the APT to the CAPM.
- Describe the inputs (including factor betas) to a multifactor model and explain the challenges of using multifactor models in hedging.
- Calculate the expected return of an asset using a single-factor and a multifactor model.
- Explain how to construct a portfolio to hedge exposure to multiple factors.
- Describe and apply the Fama-French three-factor model in estimating asset returns.