FRM Forum Discussions
Forward rates on the exam
- Forward rates on the exam, mastery of compound frequency makes many other things much easier https://www.bionicturtle.com/forum/threads/forward-rates.9404
Basis: This seems to confuse every year.
- Hull’s point is that, because a hedge tends to make an assumption about the future basis (e.g., basis will converge to zero), it is the UNEXPECTED basis strengthening/weakening that causes gains or losses. David writes, “My two first ideas about basis risk are: 1. Basis risk requires two positions (exposure and hedge instrument, formally or informally), and 2. Basis risk cannot be eliminated.” https://www.bionicturtle.com/forum/threads/basis-risk-strengthening-weakening-in-notes.7074
- Why is the T-year par yield less than the T-year spot/zero rate, if the zero rate curve is upward-sloping? https://www.bionicturtle.com/forum/threads/par-yield-ytm-and-spot-rate.1355/
- If the zero rate curve is upward-sloping, why is the T-year par yield necessarily LESS than the T-year zero rate? https://www.bionicturtle.com/forum/threads/par-yield-ytm-and-spot-rate.1355/#post-40933 . Here is the XLS: http://trtl.bz/yt-par-yield
- To delta hedge written puts, we can use shares, puts or calls. The key relationship is, Position Greek = (+/-) Quantity * Percentage Greek. https://www.bionicturtle.com/forum/threads/p1-t4-6-option-delta.4829/page-2#post-40954
Which is the base/quote currency in EURUSD?
- I don’t know about you, but it helps me to talk about the FX terminology https://www.bionicturtle.com/forum/threads/p1-t3-408-theoretical-futures-price-cost-of-carry-mode.8005/#post-41036
Cool Interactive Demo
- Convergence of Binomial, Binomial Black-Scholes, and Trinomial Option Pricing Methods http://demonstrations.wolfram.com/ConvergenceOfBinomialBinomialBlackScholesAndTrinomialOptionP/
Accessible tutorial on dividends, splits:
- A forum member highlighted “The Seven Deadly Sins of Quantitative Data Analysts” as appropriate for Risk Managers, also https://www.bionicturtle.com/forum/threads/the-7-deadly-sins-that-a-risk-manager-should-prevent.9423/
- I added a graphic to Brian’s useful exercise https://www.bionicturtle.com/forum/threads/var-and-es-for-discrete-rv.9407/ The point here is to show that VaR can have multiple answers in a discrete distribution. Say the worst return is -10% with 10% probability and the second worst is -5% with 20% probability. What is the 90% VaR? Jorion says -10%, Dowd says -5%, but Allen/Hull say -7.5%.
General Risk-Related News
Airlines pull back on Hedging Fuel Costs (WSJ):
- “… the speed of the 58% plunge in oil prices since mid-2014 caught the industry by surprise and turned some hedges into big money losers.” http://www.wsj.com/articles/airlines-pull-back-on-hedging-fuel-costs-1458514901
Credit Default Swaps Make Restructuring More Difficult: http://www.nytimes.com/2016/03/22/business/dealbook/credit-default-swaps-make-restructuring-more-difficult.html. Restructuring has historically been the most controversial credit event trigger.
- EY published a clean summary here (http://trtl.bz/ey-FRTB) of Basel’s Revised market risk framework (http://www.bis.org/press/p160114.htm). Basel’s own non-technical summary is here: http://www.bis.org/bcbs/publ/d352_note.pdf
- Basel Committee proposes measures to reduce the variation in credit risk-weighted assets http://www.bis.org/press/p160324.htm
Credit Suisse surprised by risky positions:
- “How could senior managers at Credit Suisse be unaware of its outsized, risky and hard to sell positions? Some of them dated back several years.” http://trtl.bz/0325-ft-cs.
- New York Times: http://trtl.bz/0323-nyt-cs
Wall Street Faces New Rules on Pay http://www.wsj.com/articles/wall-street-faces-new-rules-on-pay-1458762515
- Something very significant is happening in repo (Financial Times)
- Repo failures at highest levels since 2008(WSJ)
McKinsey on FinTech:
- Cutting through the noise around financial technology http://www.mckinsey.com/industries/financial-services/our-insights/cutting-through-the-noise-around-financial-technology