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
  • [GARP P2] The role of the optional Basel readings
  • [GARP P1 & P2] Wil the 2018 books be usable for the 2019 syllabus?
  • [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?
  • [P1.T1] Wouldn’t imputed correlations between positions prior to a stress period be a case of mis-measurement?
  • [P1.T2] Properties of an MA(1) process
  • [P1.T2] Understanding degrees of freedom (df) for the F-ratio used to test the joint null hypothesis
  • [P1.T2] Joint versus conditional versus unconditional probability

  • [P1.T3] How does the switch from LIBOR to an overnight indexed swap (OIS) rate change the valuation of a vanilla interest rate swap?
  • [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”,
  • [P1.T3] You do want to be fluent in compound frequency translations, here is an example with forward rates
  • [P1.T3] What is a compound[ing] swap?
  • [P1.T3] Understanding the addition/subtraction of accrued interest (AI) in the theoretical price of a treasury bond futures contract

  • [P1.T4] Does the Taylor Series matter?
  • [P1.T4] Are there different methodologies for value at risk (VaR) and expected shortfall (ES)?
  • [P1.T4] Black-Scholes riskless rate assumption and Implied volatility interpolation
  • [P1.T4] Understanding the role of accrued interest the cash settlement price of a bond
  • [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 and this same issue came up again here
  • [P1.T4] An essential difference between modified and Macaulay duration
  • [P1.T4] An FRM candidate definitely wants to understand the difference between a percentage Greek and a position Greek (e.g., position delta)

delta hedging

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


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

  • [P2.T5*] How can mapping be a solution to the problem of stale prices?
  • [P2.T6] Understanding the influence of volatility on subordinated debt
  • [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”
  • [P2.T6] Understanding the Hypothetical Collateral Amount: MAX(MTM – Threshold_C, 0)-MAX(-MTM – Threshold_I, 0)
  • [P2.T7] Does it double-count to include both an exogenous and endogenous component in liquidity-adjusted value at risk (VaR)?

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
  • [P2.T7] The exam does like to query whether regulatory capital rules incorporate diversification (aka, imperfect correlation) benefits
  • [P2.T7] Understanding the adjusted credit risk weights (RWA) under the simple approach to collateral

adjusted credit risk weights

Banking and Regulation




impact framework




  • The Law Office (LO) and Compliance Officer (CO): Status, Function, Liabilities, and Relationship





Data Science

data science

Personal Finance

millenials debt


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