Financial Risk Manager

Can you tell me how to calculate this in my calculator?

2010-03-19T10:48:27-08:00

I just bought the TI BA II Plus Professional calculator and did my first formula from Foundations 1a and I can’t figure out how to enter it into the calculator to come up with the right answer. It seems straight forward, but I can’t come to the correct amount. The formula below is from the BT website, and I come up with .2975, before calculating the SQRT. Then when I take the SQRT of .2975 I get .5454. But as you can see below the correct amount should be .132. Could someone help?

Volatility of portfolio = SQRT[50%^2*10%^2 + 50%^2*20%^2 + (2)(50%)(50%)(0.01)] = 13.2%

Can’t follow the math in FRM Handbook!! Am I doomed?

2010-03-11T16:24:53-08:00

I will be taking the FRM exam for Nov 2010 part 1. I purchased the FRM Handbook (Jorion) and started reading the first chapter on Quantitative Analysis this week. I was only able to get up to page 7 before being lost in the math. I have no CFA background and haven’t used complex math since college 15 years ago so the math is going over my head. I have a CPA (which doesn’t use complex math).

My question is whether my limited math knowledge will be a major hinder in passing the FRM exam?

The FRM Handbook seems to assume that the reader understands the math symbols and concepts, because it doesn’t explain them. Does the exam require strong math skills, because based upon the Quant Analysis chapter of the FRM Handbook it appears that it does? If so, where do I turn for instruction that will help me to understand the equations? Do I need to go get a calculus textbook and try to learn it real quick, or will the BT webinars get basic enough to help me understand the complex equations? Or is there another source that would be helpful to me in understanding the math equations. Flipping through the FRM Handbook, it appears that the math will only get worse (since I have only made it up to page 7)!

Any advice would be great.

2nd 2010 Live Webinar Review (Level 2): Saturday April 3rd at 9 AM US

2010-03-13T00:31:09-08:00

David is going to conduct our 2nd 2010 FRM review webinar on Saturday April 3rd at 9 AM U.S. EST.

What time is that for you? Click here for your local time.

The agenda is to highlight key themes in Level 2.

You MUST be a Level 2/Full Exam paid member in order to access the live webinar. If you are not , please do not register as your registration will be denied. For those of you who are unable to attend, don’t worry! The webinar will be recorded and published to the premium section ASAP.

Go here to register.

Please be sure to register for the webinar with the same email that you use for Bionic Turtle!

We are allocating 2+ hours (similar to the webinars that were conducted in 2009). Because the FRM has so much material, of course everything cannot be covered. Rather, David is going to share his view of the most critical ideas. So this webinar is merely a supplement to your regular plan. Please do not defer/delay your study plan in favor of this review; it can only give you a small “boost.” His goal is to keep you on track. This will be the 1st Level 2 review before the May exam.

Finally, perhaps you have identified a difficult question or area among Level 2? If you have a particular issue or question that you’d like us to cover, please let us know in the forum thread or email suzanne at bionicturtle dot com.

Business Risk VaR

2010-03-11T02:58:17-08:00

Hi David,
This question is on methodology of quantification of business risk VaR; what I could gather from various sources is as follows:

1.First the volatility of the time series data of actual and planned as a ratio should be found out both for the income as well as the cost. The income as well as the cost , both should be adjusted for market, credit and operational risk performance.

2. The data should further be adjusted from the holding period to planning period frequency.

3. The aggregated VaR should be found out based on correlation of two time series data and their respective volatility

4. The aggregated VaR should further be adjusted on the basis of sustainability factor. The sustainability factor is based on series of factors to describe the sustainability of earnings-at-risk hits. For example, if the factors are 1.0, 0.75, 0.5, and 0.25 respectively for year one, two, three, and four, this would imply that the full annual loss would be experienced in the first year, 75 % in the second year (due to first results in e.g. cost cutting ), 50 % in the third year and 25 % in the fourth year; at the end of year four it would be assumed that the cost structure would be fully adapted to the new income structure (following the earnings-at-risk hit). The sustainability factor for each year should be discounted by the target rate of equity return.

5. As it will be difficult for to determine /adjust income as well as the cost structure the VaR figure estimated will be within a confidence interval.

My query is in respect of the first step which states “The income as well as the cost , both should be adjusted for market, credit and operational risk performance.”... can you please elaborate what is meant by this statement? Can you please refer to any material/ excel sheet to do the same? i.e adjusting the cost and income for market , credit and operational risk performance??

Part 2 free readings from GARP

2010-03-11T20:42:50-08:00

Hi,

I got about 25 pdf files from GARP website for Part 2. Most of the readings are too long and appear to have an overlap (from scanning titles and summaries). Is it necessary to study these? Are there any summaries for these documents available?

Any ideas on how to approach these?

Thanks,
dandas

Early Enrolment for FRM Part 1 Nov2010

2010-03-10T00:42:36-08:00

Hi David,

I am too late for May 2010. Since I would not get much time to study, I was wondering if I can buy the BT FRM preparatory course early (say, in April) for FRM Part 1 Nov 2010 exams. Since my BT registration will be valid for 1 year from April, is it a good idea? I can enrol for the FRM program with GARP after June.
My only concern was the validity of the May 2010 material for the November exam. Are there any additions expected for the Nov 2010 Part 1?

Regards
Manisha

Preparation

2010-03-10T08:54:10-08:00

Hi David
Your Summaries of the material explain very well the material for the exam but i cant Wondered is it Enough ?
Do you recommend further reading ( i know that garp Advertise reading list)
I read and solve question that you upload to the website but atill i feel that i am not ready
what else can i do ?
can you contact my privat Email

Standard deviation excel

2010-03-05T03:32:05-08:00

Hi there, not sure if this is the right forum for this post, but anyway, here it goes.

I have a column of historical 5-year returns. For this data I need the standard deviation of the annualized results (that is, the 5-year returns raised to the power of 1/5). Is it possible to do this directly with the Stdev formula in Excel, or do I have to make a separate column for the annualized returns?

Regards

Best coaching for FRM

2010-02-13T11:08:47-08:00

visit http://www.frmexam.info/poll.html to vote…...right now bionic turtle is leading!!

Study strategy.

2010-02-28T22:23:00-08:00

Hi David,

I saw you spent only about 2 minutes to wrap-up the slides for 2010 market risk 5.b screencast (p.65 -81). Does it mean that those slides can be lightly read through. However, I found those slide’s content/concepts are pretty heavy. Please advise.

Thanks,
Daniel