# Today's Daily Questions

David writes totally fresh, totally original practice (quiz) questions every week: a fresh set of three (4) from Mon to Thursday = 12 new practice questions per week. A few hungry customers like to follow along, so we post them here.

Paid members please note: you do not need to collect practice questions one at a time! After a chapter (or section of related chapters) is finished, Nicole collects them into a single PDF file and uploads to the Study Planner. Most paid members will want to go straight to the study planner (unless you want to discuss/etc in the forum). Thank you!

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1. ### P2.T5.709. Coherent risk measures (Dowd, Ch.3)

Learning objectives: Define coherent risk measures. Estimate risk measures by estimating quantiles. Evaluate estimators of risk measures by estimating their standard errors. Interpret QQ plots to identify the characteristics of a distribution. Questions: 709.1. Sally is a Risk Analyst who wants to estimate the 95.0% expected shortfall (ES) but finds it much easier to retrieve the extreme...
Learning objectives: Define coherent risk measures. Estimate risk measures by estimating quantiles. Evaluate estimators of risk measures by estimating their standard errors. Interpret QQ plots to identify the characteristics of a distribution. Questions: 709.1. Sally is a Risk Analyst who wants to estimate the 95.0% expected shortfall (ES) but finds it much easier to retrieve the extreme...
Learning objectives: Define coherent risk measures. Estimate risk measures by estimating quantiles. Evaluate estimators of risk measures by estimating their standard errors. Interpret QQ plots to identify the characteristics of a distribution. Questions: 709.1. Sally is a Risk Analyst who...
Learning objectives: Define coherent risk measures. Estimate risk measures by estimating quantiles. Evaluate estimators of risk measures by estimating their standard errors. Interpret QQ plots to...
Replies:
0
Views:
165
2. ### P1.T2.710. Mean and standard deviation (Miller, Ch.3)

Learning objectives: Interpret and apply the mean, standard deviation, and variance of a random variable. Calculate the mean, standard deviation, and variance of a discrete random variable. Interpret and calculate the expected value of a discrete random variable. Questions: 710.1. The following probability matrix contains the joint probabilities for random variables X = {2, 7, or 12} and Y =...
Learning objectives: Interpret and apply the mean, standard deviation, and variance of a random variable. Calculate the mean, standard deviation, and variance of a discrete random variable. Interpret and calculate the expected value of a discrete random variable. Questions: 710.1. The following probability matrix contains the joint probabilities for random variables X = {2, 7, or 12} and Y =...
Learning objectives: Interpret and apply the mean, standard deviation, and variance of a random variable. Calculate the mean, standard deviation, and variance of a discrete random variable. Interpret and calculate the expected value of a discrete random variable. Questions: 710.1. The...
Learning objectives: Interpret and apply the mean, standard deviation, and variance of a random variable. Calculate the mean, standard deviation, and variance of a discrete random variable....
Replies:
0
Views:
133
3. ### P2.T5.708. Expected shortfall (Dowd Chapter 3)

Learning objective: Estimate the expected shortfall given P/L or return data. Questions: 708.1. A hedge fund's daily P/L for the last 300 trading days is plotted below in a histogram where the bin width is $0.20. Additionally, the worst 20 daily losses are sorted explicitly below the histogram: Which is nearest to the 99.0% expected shortfall (ES)? a. 0.920 b. 0.950 c. 1.100 d.... Learning objective: Estimate the expected shortfall given P/L or return data. Questions: 708.1. A hedge fund's daily P/L for the last 300 trading days is plotted below in a histogram where the bin width is$0.20. Additionally, the worst 20 daily losses are sorted explicitly below the histogram: Which is nearest to the 99.0% expected shortfall (ES)? a. 0.920 b. 0.950 c. 1.100 d....
Learning objectives: Identify and describe the characteristics and pay-off structure of the following exotic options: gap, forward start, compound, chooser, barrier, binary, lookback, shout, Asian, exchange, rainbow, and basket Questions: 729.1 Consider an asset with a current price of $120.00 and volatility of 16.0% while the risk-free rate is 3.0%. A regular (aka, vanilla) but deeply... Learning objectives: Identify and describe the characteristics and pay-off structure of the following exotic options: gap, forward start, compound, chooser, barrier, binary, lookback, shout, Asian, exchange, rainbow, and basket Questions: 729.1 Consider an asset with a current price of... Learning objectives: Identify and describe the characteristics and pay-off structure of the following exotic options: gap, forward start, compound, chooser, barrier, binary, lookback, shout,... Replies: 0 Views: 178 16. ### P2.T7.707. Leverage, liquidity risk, and liquidity-adjusted value at risk (LVaR) Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are... Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are... Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an... Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier... Replies: 0 Views: 241 17. ### P1.T3.728. Option combination strategies (Hull Chapter 12) Learning objectives: Describe the use and explain the payoff functions of combination strategies. Questions: 728.1. The risk-free rate is 3.0% and the the stock price of Discovery Communications (ticker: DISCK) is$20.00. Peter purchases a straddle with six-month European at-the-money options; ie.., S = K = $20.00. If the price of a call option is$2.05, then how much will the stock price...
Learning objectives: Describe the use and explain the payoff functions of combination strategies. Questions: 728.1. The risk-free rate is 3.0% and the the stock price of Discovery Communications (ticker: DISCK) is $20.00. Peter purchases a straddle with six-month European at-the-money options; ie.., S = K =$20.00. If the price of a call option is $2.05, then how much will the stock price... Learning objectives: Describe the use and explain the payoff functions of combination strategies. Questions: 728.1. The risk-free rate is 3.0% and the the stock price of Discovery Communications (ticker: DISCK) is$20.00. Peter purchases a straddle with six-month European at-the-money options;...
Learning objectives: Describe the use and explain the payoff functions of combination strategies. Questions: 728.1. The risk-free rate is 3.0% and the the stock price of Discovery Communications...
Replies:
0
Views:
161
18. ### P2.T6.416. Credit default swaps (CDS) and credit spread curve

Thank you @slacknoise This was a few years ago, I maybe did not think to refer to Choudhry (who I since uploaded here at ) and notice below what he says on page 70. Of course, the definition of the CDS-bond basis matters. I assume Gregory defines it like Choudhry: CDS-bond basis = CDS spread - [cash bond spread]; aka, CDS spread - [asset-swap spread]. That's every definition I've ever read,...
Thank you @slacknoise This was a few years ago, I maybe did not think to refer to Choudhry (who I since uploaded here at ) and notice below what he says on page 70. Of course, the definition of the CDS-bond basis matters. I assume Gregory defines it like Choudhry: CDS-bond basis = CDS spread - [cash bond spread]; aka, CDS spread - [asset-swap spread]. That's every definition I've ever read,...
Thank you @slacknoise This was a few years ago, I maybe did not think to refer to Choudhry (who I since uploaded here at ) and notice below what he says on page 70. Of course, the definition of the CDS-bond basis matters. I assume Gregory defines it like Choudhry: CDS-bond basis = CDS spread -...
Thank you @slacknoise This was a few years ago, I maybe did not think to refer to Choudhry (who I since uploaded here at ) and notice below what he says on page 70. Of course, the definition of...
Replies:
5
Views:
1,831
19. ### P2.T7.706. Economic capital

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier...
Replies:
0
Views:
173
20. ### P1.T3.727. Option spread strategies (Hull Chapter 12)

Learning objectives: Explain the motivation to initiate a covered call or a protective put strategy. Describe the use and calculate the payoffs of various spread strategies. Questions: 727.1. Assume the current price of a stock is $30.00 and imagine that we can only trade the following four options at two strike prices: At a strike price of$28.00, we can employ either a call or a put,...
Learning objectives: Explain the motivation to initiate a covered call or a protective put strategy. Describe the use and calculate the payoffs of various spread strategies. Questions: 727.1. Assume the current price of a stock is $30.00 and imagine that we can only trade the following four options at two strike prices: At a strike price of$28.00, we can employ either a call or a put,...
Learning objectives: Explain the motivation to initiate a covered call or a protective put strategy. Describe the use and calculate the payoffs of various spread strategies. Questions: 727.1. Assume the current price of a stock is $30.00 and imagine that we can only trade the following four... Learning objectives: Explain the motivation to initiate a covered call or a protective put strategy. Describe the use and calculate the payoffs of various spread strategies. Questions: 727.1.... Replies: 0 Views: 216 21. ### P1.T7.705. Extreme value theory (EVT) Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are... Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are... Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an... Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier... Replies: 0 Views: 148 22. ### P1.T3.726. More properties of stock options, including put-call parity (Hull Ch 11 cont) Learning objectives: Explain put-call parity and apply it to the valuation of European and American stock options. Explain the early exercise features of American call and put options. Questions: 726.1. The price of a dividend-paying stock is$44.00 while the riskfree rate is 3.0%. Consider a European call option and a European put option with identical strike prices, K = $40.00, and... Learning objectives: Explain put-call parity and apply it to the valuation of European and American stock options. Explain the early exercise features of American call and put options. Questions: 726.1. The price of a dividend-paying stock is$44.00 while the riskfree rate is 3.0%. Consider a European call option and a European put option with identical strike prices, K = $40.00, and... Learning objectives: Explain put-call parity and apply it to the valuation of European and American stock options. Explain the early exercise features of American call and put options. Questions: 726.1. The price of a dividend-paying stock is$44.00 while the riskfree rate is 3.0%. Consider a...
Learning objectives: Explain put-call parity and apply it to the valuation of European and American stock options. Explain the early exercise features of American call and put...
Replies:
0
Views:
149
23. ### P2.T7.704. Loss distribution approach (LDA), external loss data, & Basel's Standardized Measurement

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier...
Replies:
0
Views:
290
24. ### P1.T4.309. Discount factors and law of one price

Thanks a ton @David Harper CFA FRM
Thanks a ton @David Harper CFA FRM
Thanks a ton @David Harper CFA FRM
Thanks a ton @David Harper CFA FRM
Replies:
4
Views:
1,005
25. ### P1.T3.725. Properties of stock options, including lower bounds (Hull Chapter 11)

Learning objectives: Identify the six factors that affect an option’s price and describe how these six factors affect the price for both European and American options. Identify and compute upper and lower bounds for option prices on non-dividend and dividend paying stocks. Questions: 725.1. Consider a European call option on a non-dividend-paying stock that has a current price, c = $6.37, if... Learning objectives: Identify the six factors that affect an option’s price and describe how these six factors affect the price for both European and American options. Identify and compute upper and lower bounds for option prices on non-dividend and dividend paying stocks. Questions: 725.1. Consider a European call option on a non-dividend-paying stock that has a current price, c =$6.37, if...
Learning objectives: Identify the six factors that affect an option’s price and describe how these six factors affect the price for both European and American options. Identify and compute upper and lower bounds for option prices on non-dividend and dividend paying stocks. Questions: 725.1....
Learning objectives: Identify the six factors that affect an option’s price and describe how these six factors affect the price for both European and American options. Identify and compute upper...
Replies:
0
Views:
230
26. ### P2.T7.703. Operational data governance practices

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier...
Replies:
0
Views:
177
27. ### P1.T3.724. Mechanics of options markets (Hull Chapter 10)

Learning objectives: Describe the types, position variations, and typical underlying assets of options. Explain the specification of exchange-traded stock option contracts, including that of nonstandard products. Describe how trading, commissions, margin requirements, and exercise typically work for exchange-traded options. Questions: 724.1. A stock with a volatility of 31.0% is currently...
Learning objectives: Describe the types, position variations, and typical underlying assets of options. Explain the specification of exchange-traded stock option contracts, including that of nonstandard products. Describe how trading, commissions, margin requirements, and exercise typically work for exchange-traded options. Questions: 724.1. A stock with a volatility of 31.0% is currently...
Learning objectives: Describe the types, position variations, and typical underlying assets of options. Explain the specification of exchange-traded stock option contracts, including that of nonstandard products. Describe how trading, commissions, margin requirements, and exercise typically work...
Learning objectives: Describe the types, position variations, and typical underlying assets of options. Explain the specification of exchange-traded stock option contracts, including that of...
Replies:
0
Views:
329
28. ### P2.T7.702. Risk appetite framework (RAF), enterprise risk management (ERM) & Three Lines of Defense

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier...
Replies:
0
Views:
248
29. ### P1.T3.723. Swaps: valuation with OIS and LIBOR, comparative advantage, and currency swap valuation

Learning objectives: Explain the mechanics of a currency swap and compute its cash flows. Explain how a currency swap can be used to transform an asset or liability and calculate the resulting cash flows. Calculate the value of a currency swap based on two simultaneous bond positions. Calculate the value of a currency swap based on a sequence of FRAs. Describe the credit risk exposure in a...
Learning objectives: Explain the mechanics of a currency swap and compute its cash flows. Explain how a currency swap can be used to transform an asset or liability and calculate the resulting cash flows. Calculate the value of a currency swap based on two simultaneous bond positions. Calculate the value of a currency swap based on a sequence of FRAs. Describe the credit risk exposure in a...
Learning objectives: Explain the mechanics of a currency swap and compute its cash flows. Explain how a currency swap can be used to transform an asset or liability and calculate the resulting cash flows. Calculate the value of a currency swap based on two simultaneous bond positions. Calculate...
Learning objectives: Explain the mechanics of a currency swap and compute its cash flows. Explain how a currency swap can be used to transform an asset or liability and calculate the resulting...
Replies:
0
Views:
245
30. ### P2.T7.701. Operational risk governance

@Hermz29 Thank you for appreciating this question set! These operational risk review questions are tough (time-consuming) to write by the time I polish, cross-check and calibrate them, but there's always some fresh insights to mine from the material it seems
@Hermz29 Thank you for appreciating this question set! These operational risk review questions are tough (time-consuming) to write by the time I polish, cross-check and calibrate them, but there's always some fresh insights to mine from the material it seems
@Hermz29 Thank you for appreciating this question set! These operational risk review questions are tough (time-consuming) to write by the time I polish, cross-check and calibrate them, but there's always some fresh insights to mine from the material it seems
@Hermz29 Thank you for appreciating this question set! These operational risk review questions are tough (time-consuming) to write by the time I polish, cross-check and calibrate them, but there's...
Replies:
6
Views:
397