Bionic Turtle’s Week in Risk (ending November 18th)

Welcome to our Week in Risk! We hope everyone did well on the FRM exam over the weekend. We have some great YouTube videos and forum discussions for you this week, along with some interesting risk articles! We hope you have a great week!

New YouTube

  • Calendar and butterfly spread option trades (FRM T3-40) The final video in T3 sub-series on Option Trading Strategies series

  • Three approaches to value at risk (VaR) and volatility (FRM T4-1) The first video in new P1.T4 series

  • Exotic options: compound option (e.g., call on a call) FRM T3-41 The first video is T3 sub-series exotic option sub-series

In the Forum

  • [P2.T5] Why does the DV01 work when the hedge is a US Treasury bond against a Treasury Inflation Protected Security (TIPS)?
  • [P2.T6] Thank you Marco.Musci for a sweet decomposition (synthesis) of asset/interest rate swap
  • [P2.T6] Thank you bzauski for the insight on the potential future exposure (PFE) of a loan
  • [P2.T7] There is really only one spread calculation in the FRM although (as is often the case) it can be expressed in dollar or percentage terms
  • [P2.T7] The two versions of ARAROC are identical with respect to the accept/reject decision
  • [P2.T8] We agree that Jorion’s “expected return on the surplus scaled by assets” is awkward
  • [P2.T8[ Jorion explains that if we maximize the portfolio information ratio subject to a fixed tracking error volatility (TEV), the relative risk budgets should be proportional to the information ratios

  • [P2.T8] The time-weighted return (TWR; aka, geometric average) chains together holding period returns (HPRs)

Banking and Regulations


Technology and Cyber

  • What Are We Learning about Artificial Intelligence in Financial Services? (Fed Governor Brainard’s speech)


  • Life Insurance Companies Are Luring Fitbit and Apple Watch Users With Deals
  • SEC Whistleblower Program Has Record-Breaking Year “The SEC, which established the program in 2011 as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, awarded more than $168 million to 13 individuals in the last fiscal year … more than all of the prior six years combined.

  • [new book] Analytical Techniques in the Assessment of Credit Risk: An Overview of Methodologies and Applications


  • Fires in Paradise: Exposure Growth and Catastrophe Risk in the Wildland-Urban Interface


Investing and Personal Finance

  • [General Electric] Don’t Make These Five Investing Mistakes That General Electric Investors Made and also: Aswath Damodaran (who is author of Country Risk in FRM P1.T4) on The GE End Game: Bataan Death March or Turnaround Play?

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