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  1. Steve Jobs

    Why it's named Expected Shortfall?

    I'm reviewing the materials not to pass exams anymore but to say something simple in any job interview and sometimes I come across such questions which I apologize in case I'm wasting your time. Why it's named Expected Shortfall? Is it because most banks use VaR and since the ES is the avergae...
  2. Steve Jobs

    Interview preparation for risk positions in banks

    Hi, I just passed P2 thanks to BT of course. Now want to prepare for the job interview for risk or at least audit positions in banks. I searched the net but it's mostly general articles. I want something more updated and relevant to what people expect from someone who passed FRM but has no...
  3. Steve Jobs

    Which one decided first? RAROC or EC?

    Is RAROC calculated to accept/reject a project/loan? (as it seems to be) Or is it that RAROC is set my management to calculate economic capital? (as of last point in page 3 of BT notes for Crouhy Ch 14) I apologize if it's too naive question.
  4. Steve Jobs

    What are the axes on the longnormal plot corresponding to the Volatility Smile?

    In BT notes for Hull chapter - Volatility smile, page 7, there are 2 longnormal plots. Just wanted to make sure...the x axis is the exercise price of the options and the y axis is the price of the option, is that correct?
  5. Steve Jobs

    Is Historical Simulation a parametric approach?

    The HS is included in Dowd ch3 and since the next chapter, ch 4 has the title of Non-Parametric Approaches, I concluded that HS is parametric or am I wrong? but then in BT notes of Boudoukh, page 3, in the paragraph of HS Advantages, it's mentioned that HS avoids distributional assumptions. So...
  6. Steve Jobs

    Is there any difference in calculation of type 1 and 2 errors?

    The question 60.2 is asking for type 1 error and 60.3 is asking for type 2 error but the formula(excel function) is the same. I'm confused, are they the same?
  7. Steve Jobs

    What's the effect of increasing the number of tail slices above VaR on ES?

    Would that increase ES or decrease it?
  8. Steve Jobs

    Text instead of spreadsheets

    I'm having a hard time with reading the answers whenever the spreadsheets link is provided instead of the the full answer in text & numbers format. Moreover, I really appreciate it if it was possible to use the mathematical symbols instead of words, for instance e instead of EXP. Although I...
  9. Steve Jobs

    10-days VaR means 1-day*10^.5 or total of 10 days loss?

    Hi, In q 57.2, where it says that the bank's 10 day's 99% VaR is 1 million and actual loss exceeded the VaR in 25 out of 1000 observations, does it mean that: 1. Each of the 1000 observation is the [daily loss*10^.5] and the result of this calculation exceeded 1 million in 25 samples? 2. or...
  10. Steve Jobs

    "Computing Var & ES using POT" not in 2014 AIMs but still in questions sets

    Hi, In the comparison sheet prepared by you guys, the above AIM is excluded in 2014 AIMs, but the questions were not removed from the questions set of Dowd chapter. I guess we don't have to practice and memories this formula any more, right?
  11. Steve Jobs

    In calculating of the average for ES, should I include the 100th loss?

    In q 70.1, for calculation of ES at 95%, all losses beyond the 95th are included that is 96, 97, 98, 99, 100. In Kaplan, there are 3s question related to same topic, in 2 of them the 100th is not provided and even in the answer provided for one of them, it's mentioned that for 95%, the number of...
  12. Steve Jobs

    How to create a curve shape histogram for a historical simulation?

    Hi, Part 1: Assuming we want to calculate the daily VaR, assuming 252 days: 1. Get the daily P and D for the last 252 days 2. Calculate the daily R by ln[(P1+D1)/P0)] 3. Sort the data according to R 4. For 95% confidence level: -a: 05% * 252 = 12.6 , round it to 13, add 1 to be 14, we take the...
  13. Steve Jobs

    Return on Investment & Historical Simulation VaR

    Hi, the first question in the questions set for "Dowd Chapter 3: Estimating Market Risk Measures : Calculate VaR using a historical simulation approach", seems to be about calculating the return on investment. I'm confused and can't see how the question is related to the topic covered in the...
  14. Steve Jobs

    Confused on the different types of capital and calculations methods

    Hi, I made a list of all practice questions related to calculating required capital for credit/market/operation risks and also economic capital and regulatory capital. I'm confused regarding the difference between these capitals and whether the methods used in calculating each type of risk...
  15. Steve Jobs

    Leverage Ratio, is it Debt/Equity or Assets/Equity?

    Hi, According to a practice question, it is Assets / Equity but according to investopedia, it is Debt / Equity. http://www.investopedia.com/terms/l/leverageratio.asp I'm confused, which one should I consider in the exam?
  16. Steve Jobs

    Is the call value equal to value of equity?

    Hi, In FRM1, it was S+c = Ke + p In FRM2, I found 2 practice questions: -In first question, the question gives the V for Value of firm, F for Face value debt, S for value of equity and then asking for p. In the provided answer, the c is substituted with value of equity and p is calculated...
  17. Steve Jobs

    In calculating payoff for Lookback Options, is it necessary to know whether it's fixed/floating?

    I have a practice question about a lookback call in which it's asking to calculate the difference in payoff between fixed and float; in another practice question, it's asking to calculate the payoff for a lookback put without specifying whether it's a fixed or float. In the put question, how...
  18. Steve Jobs

    In Calc. of VaR, the Mean P/L is just loss?

    When it's mentioned in the question that the Mean P/L is 10%, then what the question actually is saying is that the mean loss is 10%? and is that why it's included as negative amount in the equation?
  19. Steve Jobs

    Are the AIMs and study materials of 2013 May and Nov the same?

    On Kaplan Website, the available materials for either part 1 or 2 are labeled as study materials of 2013 May. Does that mean that the May and Nov AIMs and study materials are not the same?
  20. Steve Jobs

    In converting Continuous rate to Discrete, does it matter how often interest is paid?

    Assume the following: An asset is quoted at 12% annually with continuous rate. Interest is paid quarterly. Is this correct for equivalent rate with monthly compounding? r = 12 * [ e^(.12/12)) - 1] = 12.06% Does it matter whether interest is paid quarterly, monthly or annually? What about...