I maybe understanding this incorrectly but "When the stock price drops, the linear approximation implies a lower value (blue line) which corresponds to a higher loss (i.e., higher VaR). " I would assume that if you are estimating a lower value for your stock your losses computed from that lower...
This may be a really one but I am a bit confused with the practice exams from garp that you have on your bionic turtle website. All the questions seems to be the same for different years. Myabe my understanding isn't correct but what does a 2018 practice exam part 1 mean compared to 2017 exam...
In all the practice problems so far we compute the up movement as u= e^(volatility)*sqrt(t). I understood the sentence " stock price can go up or down by 20% each period" to mean volatility. I don't know why I did not read the sentence " The stock price can go up or down by 20% each period" as...
I had a as my answer and I can see why thats not correct. but can someone please clarify on choice b and d further? I dont understand the wording as between previous day's variance and previous day's squared return? the variance estimate is the sum of both as per the ewma variance formulas. what...
Hi guys
Can someone please clarify the difference between a barrier options and a gap option exactly? A gap is an option that gets exercised at 1 strike but its payoff is based on another strike. This sounds very similar to a barrier option which becomes activated on 1 barrier but its payoff...
Hi David,
"So you might short T-bond futures contracts (which will increase in value if the interest rate drops)". I just want to be careful about the arrangement of this sentence to make sure I am understanding you properly. The increase in value if interest rate drops pertains to your...
Posting this here. About long and short hedges. https://www.bionicturtle.com/forum/threads/p1-t3-710-long-and-short-hedges-hull-chapter-3.10546/#post-77932
As per this thread short hedge means long basis which means that if the basis strengthens we gain. I.e. the logic is that b/c i go long the...
Hi guys,
I wanted to ask if I can skip the Hull eoc questions altogether and just do the bionic turtle ones? I am not sure there's enough of time to do everything along with the mock exams. What do you guys recommend. Is this advisable?
Not able to actually calculate out to the answer on 10.21 c- I keep getting 23.569% This is my calculation. 252*(0.0001 + 1-e^-20.0202/0.0202*20*(0.015^2/252-0.0001))= this is 252*(0.000222139)= 0.055978 sqrt of this is = 23.659%. Where am I going wrong here?
Hi I just want to come back to this topic. I understand that the study notes contains some of the end of chapter questions thats in the official books. Do all study notes contain this or is it only a few? I could not find the actual practice questions in the official books.
Didn't see a thread link for this q on the notes and couldn't find one so starting a thread on Q1 in question set for Bodie.
The answer for this in terms of expected return is 15%. The explanation is b/c "According to the equation for the return on the stock, the actually expected return on...
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