I come across numerous question about 99% VaR is equal to 97.5%, also some research claim & has also put up the below
where
99% Z Value of 2.34 using excel function (NORM.S.INV)
Equal
97.5% Z Value of 2.338 using excel function (NORM.S.DIST)
or
However when using excel functionality I am not...
Please help in understanding the below
VaR of a long call option (delta normal)
Delta = .75
Position= 50
price= 8
Vol= .25
VaR of a Short call option (delta normal)
Delta = .75
Position= 50
price= 8
Vol=.25
Please revert with calculation, I wish to know if the VaR for both is excatly...
Hi Team,
Could you please elaborate on the CVA effects in portfolio context on the Bank BS. (IMP AIM of FRM)
Also how the RWA could be adjusted considering CVA netting off at portfolio level. (Not sure if this is possible)
1) Could we show a netoff effect on BS or both CVA and RWA...
Hi David,
I am not sure if am getting this correct,
In the below post, Duration will overstate for Negative Yield shock (- 25 Bps) instead Understate & (Vica-Versa) Understate
for Positive Yield Shock (+25 Bps).
>> http://www.bionicturtle.com/wiki/FRM2009.L1.12/
12c. If the bond...
Hi David,
I am refering to your below wiki Link..
I wanted to know the correct measure of scaling VaR in the below case. Your help is always invaluable.
http://www.bionicturtle.com/wiki/FRM2009.L1.09/
c. In the answer above, the square-root-rule is employed to scale the daily yield...
Hi David,
Cud you plz explain each choice & their justification.
Which of the following is true about HF?
I.Funds with high degree of leverage and funds invested in exchange traded securities endured greater liquidity costs.
II.Statistical arbitrage fund engage in short term mean...
Another Gud one,
This is a challening FRM Question.
Two types of the multifactor model are used to create linear clones that replicate the factor exposure of the hedge funds, the weight clone and the rolling window clone method. Which of the following is incorrect about the two strategies...
Hi David,
Cud you plz take this one & explain the possible justification.
Hope all question posted by me shud help the community for better equipped for FRM, including myself.
The risk factors of HF should generate a risk premium including a risk based alpha, the returns of the HF can be...
Hi David,
Found another gud one, wud say the answer for this one in debatable.
Cud you plz shed some light on this one.
Which of the following statements is not correct?
a. In order to maximize the value, a firm must hedge its financial exposure irrespective of its capital structure...
Hi David,
This one is another gud one, need to understand better for exam purpose.
Wud highly appreciate for your help.
You are being interviewed for the position of CRO for a large fund-of-funds. You are asked to comment on the risk management approach of the CRO you would replace, James...
Hi David,
This is a tough one & need test on many concepts when inter-related with one other.
Cud you plz help with this one.
On a due diligence visit, the manager of an arbitrage fixed-income fund claims that his fund has very lowrisk. He tells you that the fund invests in...
Hi David,
This look easy one, but need strong justification. Plz help with this one.
The option adjusted spread (OAS) is used to analyze risk by adjusting for the embedded options. Which of the following risks does the OAS reflect?
A)Prepayment risk.
B)Inflation risk.
C)Credit risk...
Hi David,
Can you plz explain this one.
A bond with a 10 percent annual coupon will mature in two years at par value. The current one-year spot rate is 8.5 percent. For the second year, the yield volatility model forecasts that the one-year rate will be either eight or nine percent. Using...
Hi David,
what is the right answer, why
Extreme value theory (EVT) can assist with value at risk (VAR) calculations by providing better probability estimates of observing extreme losses than that indicated by a standard normal distribution because empirical distributions exhibit fat tails...
Hi David,
Can you plz explain why B is correct.
Which of the following statements regarding CMOs is FALSE? The:
A)early maturing tranches offer relatively greater protection against extension risk.
B)early maturing tranches offer relatively greater protection against contraction risk...
Hi David,
Cud you brief on this one.
Which of the following statements regarding the structured Monte Carlo approach is CORRECT?
I.The general equation assumes the underlying asset has normally distributed returns with a mean of μ and a standard deviation of σ.
II.The security market...
Hi David,
Could you plz explain this one.
The Peyton Formika Fund is a global macro asset allocation hedge fund designed to provide low correlations with U.S. assets. Dominic James is a fund of hedge funds manager that is analyzing the Peyton Formika Fund for signs of style drift. James...
Hi David,
Coud you plz explain this one.
Which of the following statements is CORRECT?
I.Implementation risk differs from tactical asset allocation risk in that implementation risk refers to the risk arising from implementation costs to the portfolio and tactical asset allocation risk...
Hi David,
How to go about this one.
Quantcept Investment Management decided to test the VAR model for its Treasury Income Portfolio over 10 trading days in September. Trading on the portfolio ceased during the ten days of the test. The backtest provided the following predicted daily...
Hi David,
Could you plz advice on the below. why B is the right choice.
Computing component VAR for a position using the position’s beta with respect to the entire portfolio is appropriate for returns that follow:
A) an elliptical distribution but not a normal distribution.
B)...
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