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    Thanks Bionic Turtle ..

    Hi David, I just wanted to thank you again for your incredible FRM preparation material.I have passed this exam. This has been possible with help of your preparation material. Although, without any doubt most of the credit goes to well prepared movies and this forum (here you have supported...
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    Closed form

    Hi David, What do we mean by closed form and reduced form as mentioned for many methods. Like BScholes is closed form ... Pls suggest. Rgrds OM
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    CDS

    Hi David, I am not clear how C is the hedge, now here we need to create the synthetic returns as good as selling the corporate bond. So Buy government bond and buy CDS (as we pass on the premium for the default risk). In such a way profit is locked for Wallace. But ans C mentions to Short the...
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    Delta of Forward

    Hi David, Q21 - exam 2008 II - The dividend yield of an asset is 10% per annum. What is the delta of a long forward contract on the asset with 6-month to maturity? I am not clear that why are we using delta for the "forward contract" and if we go by the cost of carry model, dividend...
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    EVT

    Hi David, Q36 in the practice exam 2008 Which of the following statements about Extreme Value Theory (EVT) and its application to value at risk are true? It mentions in answer for this that "For empirical stock market data, standard value at risk estimates at the 95 percent...
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    TBDS

    Hi David, In this Q - I am not able to understand that if default correlation is negative then that will mean that we have perfect hedge ..i.e for every one asset defaulting one will not default ...then how is it increases the investment risk..I am not clear, may be missing some conceptual...
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    Value of junior bond

    Hi David, This Qustion is frm 2008 practice set and i am not able to understand the question itself..what is it asking us to achieve ..pls help A junior bond with a face value of 200 matures in 5 years. A senior bond on the same firms also matures in 5 years, and has a face value of 100...
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    Top down approach

    Hi David, On slide 21 (ops A), you have classified Scenario analysis as top down approach.Is this correct? as I thought this one is pretty forward looking.. Pls suggest Regrd OM
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    CAR

    Hi David, In this Question, why do we reduce 1 from 5.175 while calculating CAR..pls explain. The annual credit volatility of an asset is 15%. What is 1-year credit at risk (CAR) on a 95% confidence level for a notional of $1 million? (Note: when the mean is 0 and the standard deviation...
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    CLN

    Hi David, The buyer of a credit-linked note (CLN) assumes what risks? - in the answers you have mentioned that buyer does not assume market risk. But I thought this should be a risk as change in interest rates will actually impact the pv of the value that buyer receives in any of the...
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    TROR

    Hi David, In TROR - TROR payer pays any asset appreciation and receiver pays any reduction in the value of the asset - is this correct ? As I can not figure out this concept from the study notes but came across in this question. Pls help. Q Shell Oil has borrowed USD 100 million from BBVA...
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    Your thoughts

    Hi David, Do you have some special advice before the exam ? Rgrds, OM
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    Rating transition matrix

    Hi David, I came across one concept, that in the rating transition matrix, the credit ratings are more stable over one year horizon whereas the stability declines over the long horizon. How does this happen? I thought that as we have seen the behavior of the assets/rated companies for a...
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    First to default swap

    Hi David, I need your help in understanding that why correlation in the underlying credit (in the swap basket) and the swap pricing are inversely related. I thought highly correlated asset will be a riskier proposition and therefore the spread should be higher whereas in the explanation it is...
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    Volatility smile

    Hi David, "The implied volatility decreases as the strike price increase" - I am not able to understand this concept, because as I thought that as strike price increase call option will be deep out of the money and put will be in the money (although this is relative to stock price), in both...
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    Gold Futures - Practice Question (Par 4 difficulty)

    Hi David, Ref Q: More difficult: Based on the June & Decmber futures prices, what is the implied six-month lease rate for gold, implied by the June and December futures prices (not the lease rate implied by the spot which interestingly is negative!)? When we solve for this question we have...
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    Put call parity

    Hi David, Q1 Put call parity - Practice question (Par 4 difficulty). If the options are instead American-style (paying dividends), when is it optimal to exercise? - Is it same for both put and call options (i.e before stock goes ex dividend). Because after dividend, stock price should go...
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    Eurodollar futures convexity adjustment

    Hi David, I was trying to solve this question posted by you on blog sometime back. Q Eurodollar futures convexity adjustment – Practice question (Par 4 difficulty).The four (4) year Eurodollar futures price quote = 95 (pretty near to actual).Volatility of the change in short-term interest...
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    Marginal VAR

    Hi David, I am finding some difficulty in grasping concept of marginal VAR , also not able to link up concept with Beta. I am clear on the concept but not able to derive the formula given for computation of marginal VAR. Is there any link (small tutorial) that I can refer to in order to get...
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    LVAR

    Hi David, Need your help on this question given below, this is taken from the 2008 practice set. Q Consider an asset worth USD 1 million whose 95th percentile VaR is USD 100,000 (computed using the parametric method assuming the normal distribution). Suppose the bid-ask spread on the...
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