What's new

# Search results

1. ### Chapter 4: Multivariate Variables (p. 16)

Imho you are correct. That should read (1-w)^2
2. ### Chapter 5 Probability of Loan Default

Hi, the original text is sloppy. PD is here a random variable that can be 1 or 0. The probability of PD being one is p. Expected value of PD: E[PD] = p * 1 + (1-p) * 0 = p Expected value of PD^2: E[PD^2] = p * 1^2 + (1-p) * 0^2 = p it follows that E[PD] = E[PD^2] = p Which is a property of...
3. ### Is Variance monotonious

I’m not sure if this is still of interest, but the variance is not monotounius. That is also mentioned in Wikipedia: https://en.m.wikipedia.org/wiki/Risk_measure#Variance Davids intuition is correct. Proof by counter example: Assume X and Y are returns from two different Portfolios. Let X = c *...
4. ### How to Fix the FRM: David's 2018 Memo to the FRM Committee and GARP's Board of Trustees

1.+4. is answered by Nicoles links 2. no penalizing. You should guess in case you don‘t know the answer or your time runs out. 3. All questions have the same weight

11. ### Monotonicity

I think the bad reputation of Monotonicity is not justified. It is quite intuitive. In my opinion the confusion stems from the fact, that some text are vague in distinguishing future value and p/l. The Dowd text that Davids cites is especially bad at that: That is just not true. It is not about...

Hi daveyc82, I‘m not sure what exactly your question is. Is it why backdated trades exist, or why there is a need to analyze them?
13. ### YouTube T3-13: Par yields are swap rates

I thought this is easy to show, but then I found it surprisingly difficult. Intuitive explanation: The par rate is the rate of at which a swap has a value of zero. Each coupon payment is discounted with the spot rate of it‘s payment date. So the par rate is some kind of average of the spot...
14. ### Bond duration and coupons

I think, that is what I mean. I would calculate a tiny bit different: 3.112291/111.76394 = 2.7847% and 2.9409852/102.94099 = 2.8570% Even though the total sensitivity (absolute value) is higher for the 5% coupon bond (3.11 > 2.94), the percentage sensitivity is actually lower (2.78% < 2.86%).
15. ### Bond duration and coupons

Ah, great, now I understand your point better. You equate sensitivity to changes in interest with duration (mod. duration vs. duration doesn‘t matter here). The Sensitivity is the BPV in the above formula. As you can see, the Duration is the Sensitivity per NPV. If you want you can say, that...
16. ### Bond duration and coupons

Hi akrushn2, It does not. Everything else equal a bond with a 2% coupon will have a greater duration than a bond with 5%. I‘m not sure I get your whole point, but the duration is the weighted average over the cashflows. Lower coupons mean the principal payment in the end gets relative bigger...
17. ### Hull: binominal trees learning spreadsheet

Your parameters violate the assumption u > a. Your jump up must be at least as big as the gain from the risk free rate. That is because per definition the average gain of the asset under the risk neutral probabilities must equal the risk free rate. That is not possible if u is chosen too small.
18. ### Indicator function - Expected shortfall

Hi, Assuming a continuous loss distribution f(x) with invertible cdf F(x): $ES_{\alpha} =\frac{1}{1-\alpha} \int 1_{F(x)>\alpha} \cdot x \cdot f(x) \ dx \\ = \frac{1}{1-\alpha} \int 1_{p > \alpha} \cdot F^{-1}(p) \ dp$ I personally find that the first integral is intuitively the definition...
19. ### Risk Conferences in USA

I wonder if somebody could recommend a conference on financial risk management in the USA. I’m trying to get an overview over current topics and challenges in the US and found the following major conferences: 1. Risk USA: http://www.riskusa.com/ 2. Risk Americas...
20. ### FX Swap vs FX Spot + FX Forward

A FXSwap can always be split into a FXSpot (the near leg) and a FXForward (the far leg). Both representations are equivalent in every way. Of course that doesn’t mean that every pair of FXSpot and FXForward are equivalent to some FXSwap. Also keep in mind, that a FXSpot and a FXForward are...