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Recent content by David Harper CFA FRM

  1. David Harper CFA FRM

    Example 6.3 credit risk measurement and management : computing z spread

    Hi @Gasthron My XLS above is just my replication of Malz Ex 7.2 and, for him, it's just a compound frequency adjustment: LN(1+3.50%/2)*2 = 3.47%. So, without checking the text, it looks like he assumes a flat 3.50% semi-annual yield curve. A flat yield curve is a common assumption with high...
  2. David Harper CFA FRM

    Exchange Rate

    @carlosfaria I'm told the CFA doesn't follow FX convention. Recently a colleague posted on our slack, "That is unfortunate CFA doesn't follow practical convention; if you lookup the cable, you are going to get GBPUSD 1.3205 (according to what I've been repeatedly told by practioners)."
  3. David Harper CFA FRM

    Short Equity T + long Mezzannine T (correlation impact?)

    HI @MRC2020 You may have noticed that above (https://www.bionicturtle.com/forum/threads/short-equity-t-long-mezzannine-t-correlation-impact.10203/post-48179) i happen to agree with you. As I compare Gunter's first and second editions, I notice that he switched the hedge funds' strategies...
  4. David Harper CFA FRM

    Swaps : 722.3 : Nearest estimate for the forward LIBOR rate

    Hi @ankit4685 per the title bar in the XLS, what I did there is implement Hull's Example 7.2. (10th Edition). See below. Source: Options, Futures and, Other Derivatives, John Hull (10th)
  5. David Harper CFA FRM

    Chapter 14: Trading strategies

    @DenisAmbrosov In this context, sure we can. A naked put is uncovered. In the p-c parity context, in addition to the naked put, we are just investing at the risk-free rate, which does not alter the payoff function (curve) yet satisfies the equality.
  6. David Harper CFA FRM

    Chapter 14: Trading strategies

    Hi @DenisAmbrosov (btw, is your quoted sentence from GARP's chapter or our note, out of curiosity? ... because it's a sweet comparison, to note that payoff shape of write naked put ~= write covered call). Put-call parity is awesome. I like to start with your c+K*exp(-rT) = p+S0, which to me is...
  7. David Harper CFA FRM

    BASEL optional readings

    Hi @Susanna3890 according to GARP, the FRM exam itself will not (i.e., should not) ask questions directly about the Optional Basel readings. I hope that's helpful,
  8. David Harper CFA FRM

    Market Risk - Chapter 6, page 121, 10-day VaR

    Hi @poojanmehta1 Yes, if we refer to a 1-day VaR, then we expect a 99.0% VaR to be exceeded 1.0%*250 = 2.5 days per year, and 1.0%*(250 *4) = 10 days per four years, exactly as you say. Clearly, GARP's text does not refer to a 1-day VaR, but rather to a 10-day VaR. We can further infer that...
  9. David Harper CFA FRM

    Inconsistencies in marginal var formula - Jorion Ch7

    Hi @kchristo You got it: Marginal VaR, signified with delta (confusing) as given by ΔVaR = α*β(i,p)*σ(p) where β(i,p) = COV(i,p)/σ^2(p) such that ΔVaR = α*[COV(i,p)/σ^2(p)]*σ(p) = α * COV(i,p)/σ(p). Thanks,
  10. David Harper CFA FRM

    YouTube T5-01: Lognormal Value at Risk

    Hi @frogs Yes that is correct! This is all based in Dowd Chapter In both the normal versus lognormal VaR there is the same assumption that returns are normally distributed! The difference is due to whether arithmetic returns are normally distributed (what we call "normal VaR" or just "VaR") or...
  11. David Harper CFA FRM

    YouTube T5-05: Value (VaR) Mapping a fixed-income portfolio

    Hi @jan molina No, this is VaR mapping; aka, risk factor VaR mapping. It is compatible with any of the three major VaR approaches (analytical/parametric, historical simulation, or Monte Carlo simulation).
  12. David Harper CFA FRM

    Course Errors Found in 2021 Study Materials P1.T2. Quantitative Methods

    Hi @dla00 Not sure why we have the second one: it's almost certainly that we retained a legacy expression from the prior reading. Although I don't like the second one, now that I look at it. You can see by the text that it's trying to operationalize the statement "The pmf is the difference of...
  13. David Harper CFA FRM

    Inconsistency in Stulz's BSM Equity Formula

    Hi @kchristo I don't think you attached a spreadsheet, but this perceived confusion is generally due to the fact that, because the normal is symmetrical, we can solve for PD = N(-DD) or N(DD) depending on "which side" of the normal return distribution we are using; recall that the prices are...
  14. David Harper CFA FRM

    FAQ After Exam Questions about work experience

    Hi @Chanspace As we're not GARP, we're not really supposed (allowed) to say. But you were an Operational Risk Manager! It's going to qualify. Please don't quote me, but it definitely qualifies. If an actual Operational Risk Manager didn't qualify, then a lot of far more borderline cases wouldn't...
  15. David Harper CFA FRM

    Mechanics of collateral and the types of collateral

    HI @wahahahaha Yes, that's what Gregory says: receivers of collateral may have different motivations such that they may or may not prefer cash as collateral. I think we can all understand why cash (as collateral) would be preferred: it is the most liquid asset! However, cash needs to be...