I want compare earning volatility of company x with other companies. I intend to measure earning volatility by calculating coefficient of variation of net earnings. As you know, net earnings can be both positive and negative, so my question is should I take the absolute value of the net...
Given daily stock prices, we can calculate the daily standard deviation and convert it to an annual standard deviation by multiplying it by SQRT(252).
We can also calculate the daily average (the mean) of the stock price but how can we convert it to an annual term?
Trying to submit my work experience to GARP. GARP's instruction says we can verify the 2-year work experience by submitting our CV/Resume. I'm at the "verify your professional work experience" page here but there's no option to upload resume?
How did you guys do it? Copy and...
I'm reading a report that contains the following statement/claim: "Option pricing theory tells us that a put and a call on an asset will have the same value if the strike price and exercise dates are the same, and volatility of the asset itself is the same."
My FRM/CFA knowledges tell me that...
I am analyzing a auto financing company. Balance sheet shows that "allowances for loan losses" has been declining while "consumer loan balance" has been increasing. Is this a good thing?
I think it is a good thing because "allowance for loan losses" = reserve = expected losses ~= cost of...
Sat for P2 today at the Javits center, NY.
To keep track of time, I brought my wife's watch with me to the exam today, which I left it on the table. Halfway through the exam, I was told to put away my watch. How ridiculous! I had the watch with me on FRM P1 (that was in May and I actually...
In your T5.c video there was an example on mapping a two-bond portfolio where you mapped the duration to 2.73 yrs. Can you clarify that the 2.73 yrs is the Macaulay duration (i.e., the column should be labeled Macaulay Duration)?
I am still very confused with which (Mac or Mod)...
Below I am trying to show the relationship between Merton PD and the BSM.
Merton PD = N[ -[ln(V/K)+(μ-0.5σ²)T]/σT ]
The formula inside the bracket (let’s name it D2 since it) is very similar to the formula for d2 in the BSM for pricing call option:
d2 = ln(S/X)+(r-0.5σ²)T]/σT
So we have...
Looking over my notes I found the following 3 sentences in my notes, which seem to contradict each other. Can you why they are correct or incorrect? Thanks. Sleepybird.
1. In a friction-less market, financial transactions to reduce a firm's systematic risk will not increase firm...
Does homoskedasticity simply means the variance of the residual is constant across all observation in the sample? But does it also assume that it does not depend on the independent variables?
On some parts of the notes/readings, it simply refers to constant variance but other...
Why "short a coupon bond is equivalent to long effect duration and short effective convexity?" I think bonds have positive durations, so shorting bond = shorting duration?
Also, for the below question, why am I getting 2 different duration and convexity using different method...
If you're given 1-year VARs of a firm for market risk, operational risk, and credit risk (they are uncorrelated to each other and all calculated at same significance level), can you simply sum them to get the overall 1-year firm VAR?
For a portfolio VAR (referring to Q#11 on page...
I've noticed that some topics in the past FRM are no longer in the 2012 curriculum, or at least not part of the AIMs. Can you comment the relevance/importance of these topics and if it's safe to forget about it? Specifically,
1. The Bayes' theorem formula
You have the same formula for se and sample standard deviation on page 24 and 25. So are you saying se = sample standard deviation? or should se = sample standard deviation divided by √n?
Since we're dealing with sampling distribution here, why the denominator is not n-1 here?
Sorry I have a number of questions regarding T2.a.Quantitative.
1. t-distribution variance = k/(k-2) and k = degree of freedom = n-1. This means t variance = (n-1)/(n-3)?
2. Are k = n-1 for all distributions, including chi and F? This would make chi variance = 2 (n-1)...
Sharpe ratio is good for portfolios that are not well diversified (because it accounts for total risk).
Treynor and Jensen’s are appropriate for evaluating the performance of a well diversified portfolio (because it only accounts for systematic risk).
What about the information ratio? Total...
Not sure if I posted the question under the correct forum, but the question came to my head while reading Financial Disasters, which is part of Foundations.
By reading through the case studies (financial disasters), it becomes clear that knowing and analyzing a financial institution’s...
David, please help me understanding the following:
“As long as the correlation between the rate of return on the market and the rate of inflation is positive, the market price of risk is higher than that depicted in the standard CAPM.”
èThis I can understand. Inflation increases risk. Standard...