Bionic Turtle’s Week in Risk — Ending January 15th

New FRM Practice Questions:

In the forum this week

Bank and banking

Political and regulatory risk, including systemic risk (including BIS)

Case Studies and Companies, including Strategic or Reputation risk

Financial reporting, including Accounting and Audit

Technology, including FinTech and Cybersecurity

 

Natural Science, including Climate and Energy

Exams, Financial Associations (GARP, FRM, CFA Institute) and Careers, including CRO Interviews

Personal finance

Other

Risk Foundations(FRM P1.T1)

Financial Markets and Products, including Interest Rates, Commodity Risk, and Foreign Exchange (FX)(FRM P1.T3)

  • Bond investors rebel against weaker deal terms (Covenant clause that could hit bondholders has appeared in at least a dozen sales) https://www.ft.com/content/f79ac888-d7bb-11e6-944b-e7eb37a6aa8eBondholders typically reap a premium if a company decides to pay off its debts before they are due. So-called make-whole redemptions compensate investors for missed earnings when a bond is retired earlier than promised, and the value is often spelt out explicitly in prospectuses. The make-whole claims extend to breaches of covenants, which can occur if a group’s debt surpasses certain levels or if a dividend is paid in excess of the bond document’s stipulations, triggering a technical default.

Market risk, including Equity Risk (FRM P1.T5)

Credit risk (FRM P1.T6)

Investment risk, including Pensions (FRM P1.T8)

  • It’s 2017: Do You Know Where Your Risk Is? https://blog.thinknewfound.com/2017/01/2017-know-risk/To create a portfolio risk decomposition, we take the index returns (excess of the risk-free rate) of our target portfolio and regress them on a number of common risk factors, including: Global equity returns, Yield curve level changes, Yield curve slope changes, Credit spread changes, and Dollar index returns. This regression tells us the beta that our index has to each of these factors, as well as any return that is unexplained by them.

 

Current issues (FRM P2.T9)

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