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) https://trtl.bz/2O81g1P

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 https://trtl.bz/2O83nTj
  • [P1.T2] Do we require normality to make regression inferences? https://trtl.bz/2O9u2PQ
  • [P1.T2] You need to know that beta is correlation scaled by cross-volatility, β(s, i) = ρ(s, i)*σ(s)/ σ(i)  https://trtl.bz/2Ob5SEw
  • [P1.T2] The chi-squared distribution is one of the four fundamental sampling distributions https://trtl.bz/2Ors0KS
  • [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? https://trtl.bz/2xaGZCy

quoted vs cash bond

  • [P1.T3] When is an apparent arbitrage opportunity really just masking a convenience yield?  https://trtl.bz/2x1wTUy
  • [P1.T3] Basic properties of contango and backwardation https://trtl.bz/2x4T385
  • [P1.T3] Translating commodity income from discrete to continuous to lump-sum PV/FV in the COC model  https://trtl.bz/2x6F29W
  • [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 https://trtl.bz/2NNMGQc
  • [P1.T4] Is it true that economic capital is equal to (synonymous with) unexpected loss? https://trtl.bz/2OljsoS
  • [P1.T4] Understanding Tuckman’s illustration (in Chapter 5) of hedging key-rate (KR01) exposures  https://trtl.bz/2xboXjp

Crisis anniversary

financial crisis

JP Morgan crisis

Risk and banking

  • [GARP] Normal Catastrophes: Large-Scale Disasters Make Their Way into Risk Management Consciousness  https://trtl.bz/2OrBeqt This dense article is chock-full of useful references
  • Risk, Uncertainty and Ignorance in Investing and Business – Lessons from Richard Zeckhauser  https://trtl.bz/2OArYAk
  • The Catastrophe Bond Business Is Booming https://trtl.bz/2NMvXwI

bond sales

  • Understanding your Net Interest Margin (NIM) by Moorad Choudhry (T6 FRM author of An Introduction to Securitization) https://btrm.org/thought-leadership
  • Speaking of Moorad Choudhry, his latest book looks like a keeper: The Moorad Choudhry Anthology: Past, Present and Future Principles of Banking and Finance https://amzn.to/2xmNcdB
  • Do You Know How Your Treasury Trades Are Cleared and Settled? https://trtl.bz/2OADH1O

secondary treasury market

Quantitative

box plots

Technology

blockchain

blockchain use cases

Case Studies

Other

world population

 

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