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  1. M

    How to set a stoploss

    Dear all. I have this practical case that requires me to set up a stoploss for trading book. I am okay with computing VAR, let it be absolute var 1000$, and in relative terms 2% of my current trading book value. But what about stoploss? One option is simply setup it equal to VAR, but this is...
  2. M

    Linear regression: raw prices VS changes

    dear all, in the course frm1 we usually regress prices or other raw data rather than their changes or returns. I wonder if this right or wrong? The thing is in practice I want to regress a bond yield ( YTM) over level of base rates. Though it seems logical that any bond YTM must be regressed...
  3. M

    Homoscedasticity vs heteroscedasticity

    Dear all, I now try to calculate the factor VAR for my fixed income portfolio. The factor VAR assumes that each and every asset in the portfolio has an exposure on a set of the same factors. It’s greatest advantage is no need to calculate too many volatilities and correlations ( I have some 70...
  4. M

    Initial vs Variation margin

    Dear all, I can’t really get the idea why initial and variation margin are generally different? Let’s say market value of a share equals 100 , its 99% 1 day var equals 7. I am a broker and I set margin requirements for my client as 7 to be 99% sure I will not suffer a loss in the next day...
  5. M

    Expected and unexpected losses:a practical case

    So the situation is like this. A client of us who defaulted recently has a number of nearly distressed bonds which he will give us as a compensation. Accordingly these bonds will become a part of our bond portfolio that constitutes of normal, not distressed bonds. The question to solve is at...
  6. M

    calculating volatility

    David, I am a bit concerned of voatility. This is given and that is fine, but lets put us for a minute in the shoes of a real trader. Ca you check the example and say if you think I am right or wrong computing volatility in this case of a currency pair. Of course this is only an example, I am...
  7. M

    Credit risk analysis: how to study?

    Dear forumers! I need to dive a little bit in the topic of credit analysis of borrowers. Specificaly I have a portfolio of banks and I need to assess their loans in the light of how well the final borrowers are doing. A very imporant part is analysing their financial statement, business...
  8. M

    Hull: binominal trees learning spreadsheet

    What if we have a very low volatility? In the printscreens a changed up and down factors from (1,1;0,9) to (1,01;0,99) respectively. I got funny risk-neutral probabilities (see the printscreens). With such nubers our trees dont seem to work properly? How do you think?
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