GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model is a time-series
model that uses the squared value of past returns observations and past
variances to model variance at a different time.
Intrinsic value is a term used by value investors to understand the underlying value
of a stock. There are different measures and different approaches to determine the
intrinsic value. We use free cash flow model to determine the intrinsic value. In order
to obtain the intrinsic value, you must have hedge fund class.
According to GIPS's valuation principles:
The following are guiding principles that firms must use when determining portfolio
values as the basis for return calculations:
For periods beginning on or after 1 January 2011, portfolios must be valued in
accordance with the definition of fair value and the GIPS Valuation Principles in
Chapter II of the GIPS standards.
For periods prior to 1 January 2011, portfolio valuations must be based on market
values (not cost basis or book values).
Firms must value portfolios in accordance with the composite-specific valuation
For periods prior to 1 January 2001, portfolios must be valued at least
Guidance Statement on Calculation Methodology
CFA Institute GIPS Guidance Statement on Calculation Methodology 2
For periods beginning on or after 1 January 2001, portfolios must be
valued at least monthly.
For periods beginning on or after 1 January 2010, firms must value
portfolios on the date of all large cash flows. Firms must define large cash
flow for each composite to determine when portfolios in that composite
must be valued.
Portfolios must not be valued more frequently than required by the
composite-specific valuation policy.
For periods beginning on or after 1 January 2010, firms must value portfolios as
of the calendar month end or the last business day of the month.
Firms must use trade date accounting for periods beginning on or after 1 January
2005. [Note: for purposes of the GIPS standards, trade date accounting recognizes
the asset or liability on the date of the purchase or sale, not on the settlement
Recognizing the asset or liability within three days of the date the transaction is
entered into (trade date, T + 1, T + 2, or T + 3) satisfies the trade date
requirement for purposes of the GIPS standards.]
Accrual accounting must be used for fixed-income securities and all other
investments that earn interest income. The value of fixed-income securities must
include accrued income.
Accrual accounting should be used for dividends (as of the ex-dividend date).
According to GIPS standard: The following are guiding principles that firms must use
when calculating portfolio
All returns must be calculated after the deduction of the actual trading expenses
incurred during the period. Firms must not use estimated trading expenses.
Total returns must be used. Total return is defined as the rate of the return that
includes the realized and unrealized gains and losses plus income for the
The calculation method chosen must represent returns fairly, must not be
misleading, and must be applied consistently.
Firms must calculate time-weighted rates of return that adjust for external cash
flows. External cash flow is defined as capital (cash or investments) that enters or
exits a portfolio and is generally client driven. Income earned on a portfolio’s
investments is not considered an external cash flow unless it is paid out of the
For periods beginning on or after 1 January 2005, firms must calculate portfolio
returns that adjust for daily-weighted external cash flows. An example of this
methodology is the Modified Dietz method.
For periods beginning on or after 1 January 2010, at the latest, firms must
calculate performance for interim sub-periods between all large cash flows and
geometrically link performance to calculate periodic returns. (Note: For periods
beginning on or after 1 January 2010, firms must define prospectively, on a
composite-specific basis, what constitutes a large cash flow.) For information on
calculating a “true” time-weighted return, see the “Time-Weighted Rate of
Return” section below.