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    FRM Part 2 last week review: Op Risk Priority

    Hello All, As we now approach the "LAST WEEK" of our preparation and gear up for the exam, I would like to take expert opinions from you all in Operational risk topic prioritization. What do you suppose would be a good estimate of ratio ofBasel 2/3 readings to entire Op Risk topic. Considering...
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    VAR analytical methods: Clarification

    hi @David Harper CFA FRM CIPM Following ais a question from section on Portfolio Analytical methods P2.T8.2. 2.2. A $10 million portfolio is equally invested in two currencies: $5 million in Swiss francs (CHF) and $5 million in Japanese yen (JPY). The volatility of CHF is 10%; the volatility...
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    Tranching Numerical

    Hi @David Harper CFA FRM CIPM Following questions are a part of 4 questions from Structured finance BT 130.1 For these first four questions, assume a firm issues only three capital claims: zerocoupon senior debt with face value of $300 million; zero-coupon junior debt with face value of $500...
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    VaR calculation: Short doubt

    Hi @David Harper CFA FRM CIPM I came across the following question Tim Jones is evaluating two mutual funds for an investment of $100,000. Mutual fund A has $20,000,000 in assets, an annual expected return of 14 percent, and an annual standard deviation of 19 percent. Mutual fund B has...
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    Basel 2 Question(Securitization)

    Hi @David Harper CFA FRM CIPM Came across the following question from Scheweser The standardized approach to estimating the risk arising from asset securitization: A) requires a reduction of capital for unrated positions. B) is more commonly known as the external Ratings-Based Approach (RBA)...
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    Binomial interest rate tree to calculate market price

    Helllo @David Harper CFA FRM CIPM I quote your question from the reading P2.T5.40. Replicating callable bond 40.1 Assume the market six-month and one-year spot rates are 2.0% and 2.2%, respectively. Assume, per Tuckman's two-step binomial interest rate tree (i.e., each step is six months)...
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    Backtesting VaR Calculations

    Hello @David Harper CFA FRM CIPM I am really struggling understanding the math behind the folowing BT Backtesting calculation problems. At current, the Basel II IMA green zone refers to four or fewer exceptions, the red zone refers to 10 or more, and the yellow zone refers to five through nine...
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    Portfolio credit risk :Malz

    Hi @David Harper CFA FRM CIPM There is a question in Scheweser as follows Suppose a credit position has a correlation to the market factor of 0.0625. What is the realized market value used to compute the probability of reaching a default threshold at 99% confidence level? Now the solution as...
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    Market risk: VaR calculations (Negative losses)

    Hi @David Harper CFA FRM CIPM & fellow Bionic Turtlers :) I came across a question on simple VaR calculation. The biggest challenge is interpreting the answers and calculation is quite simple Q Mean 20 Mn$, volatility 10 Mn$. Normal VaR calculation at 5% significance 1) 5 % probability of...
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    Thank you David and the BT Team (Let us all congratulate them here)

    Dear @David Harper, CFA, FRM, CIPM Thank you for solving my problems here in such a short time frame for free while other institutes charge and not even answer in detail Thank you for maintaining the passion of running the world's biggest and most active forum and improving it day by day Thank...
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    Past FRM question: Binary option VAR

    Dear David Harper, CFA, FRM, CIPM ShaktiRathore I am totally bamboozled by this past FRM question(FRM 2006). I know you said looking beyond 2009 paper was counterproductive but nonetheless was interested to know if it should be of concern for the Level 1:cool: Imagine a portfolio which holds...
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    Awesome question combining Options trading with discounting

    Dear David Harper, CFA, FRM, CIPM I am quite sure you would have seen this question earlier. Please let me know if my approach is correct,although I don't seem to get correct answer A European-style call spread consists of a long position in the 105 strike call and a short position in the...
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    Do we need to divide by sqrt(n) in this Hypothesis Test

    Dear David Harper, CFA, FRM, CIPM I came across the following questions and don't think the answer is correctly calculated A headset making company claims that the resistance of their new headset is 70 ohms. A dealer wants to test this hypothesis before placing the order. He knows that the...
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    Board of Directors: Operational risk strategy question

    Dear David Harper, CFA, FRM, CIPM ShaktiRathore I cam across an interesting question with a rather uninteresting answer. I am sure you could throw some light to it. Your Board of Directors wants a comprehensive review of each business units’ operational risk activities. As the head of the...
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    Is there anything special to this bond question?

    Dear David, I cam across this question on a forum and can't make much of it. It looks a fairly simple question but the options make me clueless. Please note. P(0,T) is the price at date 0 of a zero-coupon bond that pays $1 at date T. Given zero-coupon bond prices: |P(0,4)|= |.8386|...
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    Binomial valuation for dividend paying stocks.Please help!

    Dear David, Binomial pricing model is quite commonplace in the syllabus for non-dividend paying stocks. However if we were to have dividend paying stock we will use P(u) (Probability of up movt) = (exp^(r-q)*t - D)/(U-D) This is pretty clear, however when we calculate payoffs(multiplied by...
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    Coefficient of Determination. Are there any tricks to this?

    Dear David, Please note the following question. I have doubts on the options. I believe the question is flawed as incomplete information is given. Kindly confim Kris, FRM® is analyzing the sales growth of a Two Wheelers launched two years ago Suzuki. Majorly 3 factors contributes to sales...
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    A contradictory concept on Convexity of Bonds?

    Dear David, I read in Hull that higher the coupon payments, greater is the convexity of Bonds as it immunizes against movement in the market yields. Correspondingly bonds with payments centered around a single time (like Zero coupon bonds) have lower convexity. Key insight: Zero coupon bonds...
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    Interesting question on Linear regression

    Dear David, I went through the question and found it quite challenging as no possible solution approach was coming to my mind. Could you kindly help me get the solution? Thanks Consider the following linear regression model: Y = a + b*X + e. Suppose a = 0.05, b = 1.2, Std(Y) = 0.26, Std(e) =...
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