WHICH OF THE FOLLOWING LONG CALL OPTIONS IS MOST LIKELY TO HAVE...

54. Which of the following long call options is most likely to have an increasing delta as time to

expiration decreases?

A. Out‐of‐the‐money.

B. At‐the‐money.

C. In‐the‐money.

© Wiley 2018 All Rights Reserved. Any unauthorized copying or distribution will constitute an infringement of copyright.

126

Portfolio Management—Performance Evaluation

Question 10

Use the following information to answer the next six questions.

Katherine Kidman is a pension fund adviser who has been asked by the trustees of a pension fund to

evaluate the performance of fund managers that the pension fund has or intends to invest in.

She begins by examining the performance of David Jones. David Jones is a U.K. value fund manager

who runs a portfolio that produced a return of 6.14% over a one‐month period. Over the same period, the

market index generated returns of 6.11%.

Based on David’s past portfolios, a normal portfolio with typical systematic risk exposures is determined

to have generated returns of 5.96% over the period.

Katherine analyzes the performance of Jones’ portfolio using a fundamental factor model. Exposures to

fundamental factors are represented as standard deviations from mean values as calculated from market

capitalization–weighted stocks. Results are displayed in Exhibit 1.

Exhibit 1

Micro Attribution with a Fundamental Factor Model

Portfolio

Exposure

Normal Portfolio

Exposure

Active

Impact

Return

Market Index

Return

6.11%