Bionic Turtle’s Week in Risk (ending November 11th)

Welcome to our Week in Risk! It is exam week, and our forum is full of informative FRM discussions that will help you to make sure you’ve learned the FRM concepts in depth for the exam on Saturday! Have a great week and good luck on the exam!

In the forum (selected only)

  • [P1.T1] Thank you evelyn.peng for the insight on why (in the mean-variance framework) the predicted variance is always greater than historical variance
  • [P1.T1] A typical pattern-like question for the CAPM/SML cluster
  • [P1.T1] Is there any shortcuts to utilizing the risk-adjusted performance measures (RAPMs; e.g., Sharpe, Treynor)?
  • [P1.T1] Good question by flosoma about the interpretation of the APT as an ex post and/or ex ante model
  • [P1.T2] Bayes Theorem in English: Posterior = (Likelihood*Prior)/Evidence


  • [P1.T2] An FRM candidate should be comfortable with covariance(X,Y) = σ(X,Y) = E(XY) – E(X)*E(Y) and its relationship to indendent variables
  • [P1.T2 Hull EOC 10.21] GARCH(1,1) parameters
  • [GARP P1.T3*] Is there an easy way to relate the directional relationship between futures prices and interest rates?
  • [P1.T3] Thank you, again, flosoma for the reminder thank you can use the calculators [2nd] + [Bond] function to retrieve the clean price!

interest rates



  • [P2.T8*] What does Grinold mean by scaling and trimming alphas?
  • [P2.T8] We can alternatively solve surplus at risk (SaR) by calculation surplus volatility as a percentage (it’s just not obvious sometimes)
  • [P2.T8] Understanding how regressions translate into factor-based benchmark portfolios


  • Wells Fargo reports another internal error that caused a failure to offer mortgage loan modifications to 545 borrows who consequently lost their homes
  • Banks in the changing world of financial intermediation

banks global equity



excel var



shareholder initiatives


  • Alpha within Factors “At OSAM, we measure valuation using a composite index that takes inputs from the P/E ratio, the enterprise-value-to-ebitda ratio, the enterprise-value-to-free-cash-flow ratio and the price-to-sales ratio. In testing, we’ve found that this approach generates excess returns that are smoother and more consistent than the metrics in isolation.
  • The Radical Saving (aka, FIRE) Trend Is Based on Fantasy
  • Quants Are Facing a Crisis of Confidence

quants crisis


linear regression


5-hour rule


strong dollar


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