What's new

Search results

  1. afterworkguinness

    Exam Feedback November 2015 Part 2 FRM Exam Feedback

    One question that stuck out for me was along the lines of: An index halted trading for 5 weeks, during that 5 weeks, would the VaR of a portfolio that replicated the index be 0 or unchanged from before the halt in trading. Would the VaR immediately after trading resumed be the same as when...
  2. afterworkguinness

    Exam Feedback November 2015 Part 2 FRM Exam Feedback

    A reoccurring them was relationships between variables. Very few direct calculation questions, quite a number of qualitative questions. A few sets of questions pertaining to very lengthy setup information. - Next to nothing on the Tuckman readings from Market risk; which I spent a good month...
  3. afterworkguinness

    @David Harper CFA FRM CIPM & @Nicole Manley thanks for all the support!

    @David Harper CFA FRM CIPM & @Nicole Manley thanks for all the support!
  4. afterworkguinness

    Decrease in market value - Total Return Swap

    Hi David, In your topic review for credit risk, you have a practice question from the FRM Handbook where a Company buys a total return swap, the mtm value of the underlying drops, but they receive no compensation for the decrease in market value, only the standard LIBOR + spread payment. Is this...
  5. afterworkguinness

    marginal PD

    I think I've got it now, with a little help from elsewhere and a lot of help from David's youtube video on the topic. In Malz, marginal PD means the unconditional probability of default in a given year. Let's not confuse this with what me usually mean when we say unconditional PD...
  6. afterworkguinness

    Coming across a lot of imprecise GARP practice questions and running scared.

    Coming across a lot of imprecise GARP practice questions and running scared.
  7. afterworkguinness

    Conditional PD - GARP practice question # 10 (2015)

    @David Harper CFA FRM CIPM Looking at this again, I think there is a mistake in Garp's answer. Assuming they are asking for the 2 year conditional PD, should they not divide by the 1 year probability of survival? The question asks for the probability of survival in the first year followed by...
  8. afterworkguinness

    Conditional PD - GARP practice question # 10 (2015)

    Thanks Matthew, I can see that now. These default probabilities might just be my undoing. I thought I had them locked in but I'm still struggling with them. Especially marginal PD .
  9. afterworkguinness

    marginal PD

    Hi @David Harper CFA FRM CIPM , This whole marginal PD is giving me a headache :). Per the assigned Malz reading, marginal PD is the derivative of the cumulative PD with respect to time right ? This is not the same as conditional PD right (conditional PD = PD conditional on survival up to this...
  10. afterworkguinness

    Observation on Single Factor Model for credit risk

    (I'm not 1,000% on this, so take it with a grain of salt. To my credit, I've read the relevant pages a couple hundred times over the year) I was confused by usage of the single factor model presented in Malz (which by the way is called the Single Factor Vasicek Model - why some of the authors...
  11. afterworkguinness

    Conditional PD - GARP practice question # 10 (2015)

    Hi, I thought the conditional probability of default (the probability of default in year T given survival up to that point) was hazard*e^(- hazard * time). Putting that to the test in GARPs practice question below yields a close but incorrect value. Question: Is the problem asking for...
  12. afterworkguinness

    GARP Practice Exam 2013 P2 Question 8

    When I calculate a hazard rate to get the default probability, I am a bit off from the correct answer. Is there something wrong with my approach below? Bond return = [(Face/Price)^(1/maturity)]-1 = 25% Spread = Bond Return - Risk Free Rate = 20% Hazard Rate = (Spread/1-Recovery) = 20% 1 year...
  13. afterworkguinness

    GARP Practice Exam 2013 P2 Question 8

    Hi Prebhan, can you post the entire question ?
  14. afterworkguinness

    Square root rule in short rate models

    I may have posted too soon. Reading the text and the practice question more closely, Tuckman's dw has a standard deviation of sqrt(1/12) already and the practice question text says dw is a standard normal implying a standard deviation of 1 and not 1/12 ....great practice questions btw.
  15. afterworkguinness

    Square root rule in short rate models

    Hi , In the practice questions for Tuckman chapter 9, the random normal in the short rate simulation models is scaled by sqrt(dt). In Tuckman's equation 9.2 (source page 252), the volatility is annual with a monthly time step, but he doesn't scale dw at all. Should we scale dw when the time step...
  16. afterworkguinness

    Equity tranche spread wrt correlation

    Hi David, Thanks for your detailed reply. Sorry to take more of your time but I'm still confused about a couple things. A I can see when you are selling credit protection in exchange for receiving a fixed spread, how an increase in the risk (default correlation in this case) will result in the...
  17. afterworkguinness

    Risk neutral vs real world

    David gave a great explanation above. After additional reading (and time for it to sink in), I thought I'd chip in the way I understand the difference in case it's helpful for anybody. Assume in reality the probability of a zero coupon bond going up 50bps in 60 months is 50% and the probability...
  18. afterworkguinness

    Equity tranche spread wrt correlation

    Hi @David Harper CFA FRM CIPM , Thank you very much for replying so quickly and on a Saturday none the less; greatly appreciated! I am left with another question though after reading your reply and the linked post... A naïve question, but I'm not understanding the role of a spread in a...
  19. afterworkguinness

    Error in Meissner text?

    Hi, I think there is an error in the Meissner text and can't find an errata for this text to verify. On page 19 the foot note reads "10. Shorting the equity tranche means being short credit protection or selling credit protection, which means receiving the (high) equity tranche contract spread"...
  20. afterworkguinness

    Equity tranche spread wrt correlation

    Hi, I'm having trouble reconciling the effect of an increase in default correlation between the Meissner and Malz readings. To me they sound like they are saying the opposite of each other, so I must be missing something. Meissner figure 1.7 shows for the equity tranche as default correlation...
Top