Bionic Turtle’s Week in Risk (ending November 4th)

Welcome to our Week in Risk blog! This week, we’ve included a ton of great FRM forum links to help you in your studies for the FRM exam. We’ve also found some interesting risk articles from around the globe! Have a great week!

In the forum (selected only)

FRM exam tips

  • [GARP P1] Kudos to kchristo for noticing a new mistake introduced into the duration application when GARP fixed a previous error  https://trtl.bz/2Q5N7Dh
  • [GARP P2] The role of the optional Basel readings https://trtl.bz/2Q20AvW
  • [GARP P1 & P2] Wil the 2018 books be usable for the 2019 syllabus? https://trtl.bz/2qmT43B
  • [BT FRM] A variation Q&A on a typical question that is asked by customers: Is this do to expand our understanding and help us get more comfortable with the topic, or do you think we should expect a question like this on the exam? https://trtl.bz/2QkDiS3
  • [P1.T1] Wouldn’t imputed correlations between positions prior to a stress period be a case of mis-measurement?  https://trtl.bz/2Qg5OUS
  • [P1.T2] Properties of an MA(1) process https://trtl.bz/2Q9HKmU
  • [P1.T2] Understanding degrees of freedom (df) for the F-ratio used to test the joint null hypothesis   https://trtl.bz/2Q4MQRg
  • [P1.T2] Joint versus conditional versus unconditional probability https://trtl.bz/2qkxuwx

  • [P1.T3] How does the switch from LIBOR to an overnight indexed swap (OIS) rate change the valuation of a vanilla interest rate swap?  https://trtl.bz/2R95ibu
  • [P1.T3*] I‘d be very Interested to see a non-excel example of how to calculate a CF if the Maturity After rounding down is the “Harder case”, https://trtl.bz/2Q5L81N
  • [P1.T3] You do want to be fluent in compound frequency translations, here is an example with forward rates https://trtl.bz/2qsuVbZ
  • [P1.T3] What is a compound[ing] swap? https://trtl.bz/2Q1ZlNi
  • [P1.T3] Understanding the addition/subtraction of accrued interest (AI) in the theoretical price of a treasury bond futures contract  https://trtl.bz/2PZacYd

  • [P1.T4] Does the Taylor Series matter? https://trtl.bz/2q6QTB0
  • [P1.T4] Are there different methodologies for value at risk (VaR) and expected shortfall (ES)?  https://trtl.bz/2q5iD9a
  • [P1.T4] Black-Scholes riskless rate assumption and Implied volatility interpolation  https://trtl.bz/2Q2n2oF
  • [P1.T4] Understanding the role of accrued interest the cash settlement price of a bond  https://trtl.bz/2Q3RQp0
  • [P1.T4] You can find the full (aka, cash) price at settlement either by compounding forward from the last coupon, or by discounting back from the next coupon https://trtl.bz/2Q7tCKy and this same issue came up again here https://trtl.bz/2qrIQ1Y
  • [P1.T4] An essential difference between modified and Macaulay duration https://trtl.bz/2QiHuSw
  • [P1.T4] An FRM candidate definitely wants to understand the difference between a percentage Greek and a position Greek (e.g., position delta) https://trtl.bz/2Qkgcey

delta hedging

  • [P1.T4] My mucked-up key rate ’01 (KR01) is hopefully at least instructive of the nuances involved  https://trtl.bz/2QhzTn3
  • [P2.T5] The elegant derivation of joint default probability is possible because default is a Bernoulli  https://trtl.bz/2Q9HAvO
  • [P2.T5] Thank you Buglia for correcting my mistake when commenting on the upper bound of the VaR backtest confidence interval  https://trtl.bz/2Q5MWYD
  • [P2.T5] Good observation by ddfcrystal in regard to value at risk (VaR) under P(+)/L(-) versus L(+)/P(-)  https://trtl.bz/2Q5zowo
  • [P2.T5] Can we simply the guidance around choosing a one- versus two-tailed deviate; e.g., 1.65 versus 1.96  https://trtl.bz/2q52bpx

var

  • [P2.T5] Why an interest rate tree doesn’t directly display N-period volatility https://trtl.bz/2Q3Wwey
  • [P2.T5] Should we assume Basel’s methodological assumptions in a VaR backtest?  https://trtl.bz/2QbVrlj
  • [P2.T5] How is Jorion measuring the variance improvement in a tracking portfolio?  https://trtl.bz/2qrIybo
  • [P2.T5] How might we map (as in VaR mapping) an interest rate swap immediately AFTER the reset date? https://trtl.bz/2qpxhs3
  • [P2.T5] Understanding transposition, post- and pre-multiplication in the matrix calculation of portfolio variance  https://trtl.bz/2Q4FRYu

  • [P2.T5*] How can mapping be a solution to the problem of stale prices? https://trtl.bz/2qr6hZ9
  • [P2.T6] Understanding the influence of volatility on subordinated debt https://trtl.bz/2Q0uDUY
  • [P2.T6] I’m not entirely sure why our question 417.3 on the bilateral credit value adjustment (BCVA) is well-liked; e.g., “I am glad I saw it before the exam” https://trtl.bz/2Q3WN14
  • [P2.T6] Understanding the Hypothetical Collateral Amount: MAX(MTM – Threshold_C, 0)-MAX(-MTM – Threshold_I, 0)  https://trtl.bz/2qlW7Ju
  • [P2.T7] Does it double-count to include both an exogenous and endogenous component in liquidity-adjusted value at risk (VaR)?  https://trtl.bz/2R7A9oI

bid-ask spread

  • [P2.T7] Value at risk (VaR) under extreme value theory (EVT) are based on Dowd’s peak-over-threshold (POT) and block maxima (GEV) approaches https://trtl.bz/2RaMJDU
  • [P2.T7] The exam does like to query whether regulatory capital rules incorporate diversification (aka, imperfect correlation) benefits  https://trtl.bz/2QkOLRK
  • [P2.T7] Understanding the adjusted credit risk weights (RWA) under the simple approach to collateral  https://trtl.bz/2qjSio6

adjusted credit risk weights

Banking and Regulation

FICO-cyber-risk-score

banks

Risk

impact framework

Climate

Quantitative

Governance

  • The Law Office (LO) and Compliance Officer (CO): Status, Function, Liabilities, and Relationship  https://trtl.bz/2qub1Ny

Cyber

cyber

Career

technology

Data Science

data science

Personal Finance

millenials debt

 

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