Financial Risk Forum Discussions
- Estimating VaR with normally distributed arithmetic returns (in contrast to normally distributed geometric returns) https://www.bionicturtle.com/forum/threads/estimating-var-with-normally-distributed-arithmetic-returns.9432/. I think it’s worth understanding Dowd on this concept.
Pricing a theoretical Treasury bond futures contract
- Talking about the tedious exercise of pricing a theoretical Treasury bond futures contract http://trtl.bz/0330-tbond-futures It’s just cost of carry (COC) where the commodity is a cheapest-to-delivery (CTD) bond, but somehow knowing that does not make it easy!
Relative VaR (rVaR) and Absolute VaR (aVaR)
- You can scale relative VaR (rVaR) with the square root rule (SRR) but you can’t scale absolute VaR (aVaR) because aVaR includes the drift term https://www.bionicturtle.com/forum/threads/estimating-var-with-normally-distributed-arithmetic-returns.9432/
- Interpreting a QQ plot https://www.bionicturtle.com/forum/threads/qq-chart.9380/#post-41085 illustrated by ami44 with student’s t
Countercylical buffer versus capital conservation buffer
Marginal CVA and Incremental CVA
- Is there any necessary relationship (e.g., less than, greater than) between marginal CVA and incremental CVA https://www.bionicturtle.com/forum/threads/marginal-cva.9437/
How many ACTUAL days are between Feb 15, 2014 (last coupon) and July 1st, 2014 (settlement)? David got the wrong answer, too, at first!
General Financial Risk Related News
Chief Risk Officers Are Taking on a Broader Role
- A venture capitalist on the risk implications of Spotify’s $1.0 billion convertible note financing (”Financing structures are all about dividing risk. It sometimes really concentrates risk and creates dis-alignment, too. Let me explain.”). See http://jtangovc.com/risk/ These note terms seem very favorable to the investors: “In the event that Spotify doesn’t go public within twelve months the 20 percent discount grows 2.5 percent every six months until such it does.” (David loves spotify, and listens to it all day long while he is working)
- Theranos Devices Often Failed Accuracy Requirements http://www.wsj.com/articles/theranos-devices-often-failed-accuracy-requirements-1459465578 David has been following this story with some amazement. Does this look like an appropriate Board of Directors? It is shocking that Henry Kissinger didn’t ask tough questions about laboratory protocols (https://www.theranos.com/leadership)
- Protiviti’s C-suite survey of Top Risks for 2016, see http://www.protiviti.com/toprisks Top five. 1. Regulatory change and scrutiny, 2. Economic conditions, 3. Cyberthreats, 4. Succession/Talent challenges, and 5. Privacy and identify protection
- Increased Frequency of Terrorism Changing Insurance Market http://blogs.wsj.com/riskandcompliance/2016/03/30/increased-frequency-of-terrorism-changing-insurance-market/
- MetLife Wins Bid to Shed ‘Systemically Important’ Label http://www.wsj.com/articles/federal-judge-rescinds-federal-government-determination-that-metlife-is-systemically-important-1459349828
- PWC FinTech report http://www.pwc.com/gx/en/industries/financial-services/publications/global-fs-fintech-survey1.html
- How to fit a copula model in R: Part 2 http://firsttimeprogrammer.blogspot.com/2016/03/how-to-fit-copula-model-in-r-heavily_29.html
- What’s new in Excel 2016 for Windows http://trtl.bz/ms-excel-whats-new-2016
- Wall Street Banks Have Basel’s Ear in Pushback on Market Risk http://www.bloomberg.com/news/articles/2016-03-31/banks-get-chance-to-show-just-finished-trading-rule-is-too-tough
- BIS: Second report on risk-weighted assets in the banking book published by the Basel Committee http://www.bis.org/press/p160401.htm
- The Relevance of Basel III in Ensuring Prudent Risk Management in Banking http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2745372
- Regulators Examine Financial Risks of Climate Change http://www.wsj.com/articles/regulators-examine-financial-stability-risks-to-climate-change-oil-exposure-1459444688 “Institutions such as the Bank of England, the Financial Stability Board and the European Systemic Risk Board are examining how banks, insurers and pension funds would cope if policies designed to reduce carbon-dioxide emissions led to a sharp drop in the share price of oil, gas and coal companies” Here is the Phase I Report by the The Task Force on Climate-related Financial Disclosures: https://www.fsb-tcfd.org/phase1report/
- Climate Model Predicts West Antarctic Ice Sheet Could Melt Rapidly http://www.nytimes.com/2016/03/31/science/global-warming-antarctica-ice-sheet-sea-level-rise.html?_r=0
- Status report: How’s the climate doing? http://kottke.org/16/03/status-report-hows-the-climate-doing
- OpenIntro Statistics https://www.openintro.org/stat/textbook.php?stat_book=os David just discovered this brilliant, free textbook (He purchased a physical copy, it looks good at first glance). They have a cool shiny app distribution calculator at https://gallery.shinyapps.io/dist_calc/
- We are often asked, “Where can I find a an example of a critical Z/t lookup table?” OpenIntro publishes a package including these typical lookup tables: http://trtl.bz/openintro-prob-tables
- Statistics: When Confounding Variables Are Out of Control http://blogs.discovermagazine.com/neuroskeptic/2016/04/02/confounding-variables/#.VwG1l3pWvDE If ice cream sales are positively correlated with drownings, does ice cream cause drownings?
- The 8-Bit Game That Makes Statistics Addictive http://www.theatlantic.com/science/archive/2016/03/the-8-bit-game-that-makes-statistics-addictive/475848/ David almost got sucked into this fun game, but has no idea why it’s fun 😉