Bionic Turtle’s Week in Risk (ending September 16th)

Welcome to our Week in Risk blog! This week, David has posted two new YouTube videos discussing Eurodollar futures contracts! We’ve also published new FRM practice questions covering the concepts of Black-Scholes-Merton (BSM) and stress testing banks. Make sure to read through some of the detailed discussions from our FRM forum too! Have a great week!

New Practice Questions

  • P1.T4.816. Black-Scholes-Merton (BSM) for dividend-paying stocks and the early exercise decision for American-style options (Hull Ch.15)

Black-Scholes-Merton (BSM)

New YouTube

In the Forum

omitted variables

  • [P1.T2] The difference between a sample variance and variance of the sample mean
  • [P1.T2] Do we require normality to make regression inferences?
  • [P1.T2] You need to know that beta is correlation scaled by cross-volatility, β(s, i) = ρ(s, i)*σ(s)/ σ(i)
  • [P1.T2] The chi-squared distribution is one of the four fundamental sampling distributions
  • [P1.T3] This Question by Hull (EOC 6.8) is very instructive on the fundamentals: The price of a 90-day Treasury bill is quoted as 10.00. What continuously compounded return (on an actual/365 basis) does an investor earn on the Treasury bill for the 90-day period?

quoted vs cash bond

  • [P1.T3] When is an apparent arbitrage opportunity really just masking a convenience yield?
  • [P1.T3] Basic properties of contango and backwardation
  • [P1.T3] Translating commodity income from discrete to continuous to lump-sum PV/FV in the COC model
  • [P1.T3] In an interest rate swap (IRS) valuation, the FRA approach will match the “as if two bonds” approach, but you need to check compound frequencies
  • [P1.T4] Is it true that economic capital is equal to (synonymous with) unexpected loss?
  • [P1.T4] Understanding Tuckman’s illustration (in Chapter 5) of hedging key-rate (KR01) exposures

Crisis anniversary

financial crisis

JP Morgan crisis

Risk and banking

  • [GARP] Normal Catastrophes: Large-Scale Disasters Make Their Way into Risk Management Consciousness This dense article is chock-full of useful references
  • Risk, Uncertainty and Ignorance in Investing and Business – Lessons from Richard Zeckhauser
  • The Catastrophe Bond Business Is Booming

bond sales

  • Understanding your Net Interest Margin (NIM) by Moorad Choudhry (T6 FRM author of An Introduction to Securitization)
  • Speaking of Moorad Choudhry, his latest book looks like a keeper: The Moorad Choudhry Anthology: Past, Present and Future Principles of Banking and Finance
  • Do You Know How Your Treasury Trades Are Cleared and Settled?

secondary treasury market


box plots



blockchain use cases

Case Studies


world population


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