I passed FRM Part I with 1111 and FRM Part II with 11132. Many thanks to BT and Special thanks to David for support and help in my preparation.
I cannot imagine myself going through actual readings from GARP given the time constraints and work pressures. Great job by BT in careful construction...
I have a basic question on CVA : Is it calculated on Profit/Loss value or the future value (which is unknown and hence we take expected value) ? Gregory talks about exposure and replacement cost which seems to be the expected future value and not loss value. Some examples for FRM exam just have...
My feedback : The exam tried to trick by giving too much information and some of it also irrelevant information in at least few questions. I think it required reading the question carefully and then picking the relevant information from it. There were questions on SOFR and machine learning...
This was an interesting and helpful topic to read on. Thanks everyone who contributed. In Crouhy notes on Securitization in Credit Risk Module, Page 31, I think the terminology for CLN is more like WIki :
In this structure there are no margin calls, and the maximum downside for the investor...
Thanks a lot David. That was very helpful explanation and clarification. Feel comfortable now, knowing what you mentioned about accuracy and sloppiness.
I apologize in advance if this is not the right post. A quick question about EVA (Economic Value Added). Study notes Crouhy, Page 17 - it is defined as :
EVA (economic value added), or NIACC (net income after capital charge), is the after-tax adjusted net income less a capital charge equal to...
Thank you David. I looked at the other thread and didn't get a clear answer. @Nicole Seaman , I put it here as the other thread discusses CVA as function of credit spread and I thought my questions were different.
Thanks for the detailed explanation. One comment around marginal default probability- I thought it is defined as {exp(-h*t_i) - exp(-h*t_(i-1))} , i.e. difference of cumulative probabilities for two times instead of just the differential of cumulative default probability.
Hi David, I have a couple of questions regarding CVA -
1. Risky Value = risk-free value - CVA. Is CVA here positive or negative ? My understanding is that its positive here as I would pay less for something risky than its risk-free value. Please clarify as Gregory notes shows it as negative...
Hi David, In gregory notes about expected exposure etc. - In Fig 7.14, EFV of a payer swap is always negative (seems like return %). First, I wanted to confirm EFV is just the expected value of all possible values , which is equivalent to fair value of the swap, is that correct ? If yes, is it...
Thank you Nicole. I will keep in mind for future. Since my question was from the part just few pages after my initial question in the study notes, I ended up asking in the same thread. Having said that, yes my question is kind of answered as David's answer is what I expected to be the reason. In...
One more thing : Gregory mentions exposure being proportional to sqrt (T). But isnt that the case when we talk about volatility or VaR(PFE) ? If we are just talking about expected exposure, then that would be proportional to just T ?
Hi David, firstly sorry if I am posting this in the wrong thread. On Page 52 of the Jon Gregory notes, below is mentioned about the segregation. Should the red highlighted line be 'required' instead of 'not required' ?
Segregation: Even if collateral is not rehypothecated, there is a risk that...
Hi David, Thank you so much for your detailed explanation. That adds up now. I have been scratching my head over this chapter regarding what increases or decreases.
Thanks Nicole.
I am puzzled by stulz chapter so I have more dumb questions perhaps. When we say debt or equity increases or decreases in value with volatility, intererst rate etc..are we assuming rest everything remains same ? Suppose there is no subordinate debt, only senior debt and equity...
Hi David, I am puzzled by the following lines
"Consequently, when a firm is in poor financial condition, subordinated debt is unlikely to be paid in full and is more like an equity claim than a debt claim. In this case, an increase in firm volatility makes it more likely that subordinated debt...
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