This question is around the Surplus loss quantile. The same question appears in the 2017 and 2018 past papers, but one uses z = 1.96 and the other z = 1.645 for the 95% confidence. Surely this is a one-tailed test?
Or is it a mistake by GARP? Would appreciate any quick responses given the exam...
Firstly apologies if there's already a thread on this, but couldn't see anyone after using the search function.
My question related to Q5 of the 2016 practice exam:
A risk analyst is valuing a 1-year credit default swap (CDS) contract that will pay the buyer 80% of the face value of a...
I still don't understand the calc in the answer. Surely the worst case change in the value of the collateral should be compared with the worst case change in the value of the exposure (WITHOUT collateral) to show the former mitigates the latter.
Or am I being stupid?
Stupid question, but how did you get the other probabilities in the matrix apart from the 0.1?
Was it using Bayes' Theorem? If you would you mind doing the calc for just one of the entries?
Apologies for the late reply and thank you for your rwsponse. Thats really helpful.
It's beginning tkcmake sense but there's one but that confuses me slightly still. Would S(t)corr matrixS not equal a scalar? It's a 1x3 matrix multiplied by a 3x3 matrix. This produced a 1x3 matrix...
I'm at a loss as to how diversified VaR is computed whe mapping linear derivatives. Undiviersified VaR is easy enough: sum(pv of cash flows x risk).
On page 67 of the official materials it says pre and post multiply by the pv of cashflows to get diversified var. But I don't get what it...
I received my FRM II books the other day. For four of the five topics but not this one. But I understand this will be 10% of the exam.
How do we prepare for this section? Will there be stuff coming out about it nearer the time? Is there a "syllabus" of some kind for it.
Sorry if this has...