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    Indicator function - Expected shortfall

    Hi @David Harper CFA FRM, Perhaps this is a question for the broad community and I would like to ask sth. very specific about the indicator function on p.66 in Dowd's book "Measuring market risk" He writes that "the ES gives all tail-loss quantiles an equal weight, and other quantiles aweight...
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    Bionic Beta wins the 1970s

    Hi @David Harper CFA FRM, just something funny aside from all the exam preparation. When you launched Bionic Turtle did this article somewhat influence the name "Bionic Turtle"? ;) https://www.forbes.com/sites/rickferri/2014/02/27/bionic-beta-wins-the-1970s/#55e40cf03995
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    Correlation - Number of pairings

    Hi @David Harper CFA FRM, I had to think about it myself for some minutes: just wanted to share this with the community here. Let's say we have 18 assets. How many correlation pairs would we have? We could go the long road writing: Asset (A,B) Asset (A,C) Asset (A,D) ... ... Asset (B,C) etc...
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    Risk Budgeting - Risk Contribution of Assets to the Portfolio

    Dear All, Dear @David Harper CFA FRM, first, apologies if this turns out to be a quick fix/straightfoward problem but I do need some help/input with regard to the following: This is from the CAIA (level 2) and it's about a 3-asset (classes) example of risk budgeting. You are given the means...
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    Jorion, Incremental VaR - Best hedge (equation 7.24-26)

    Hi @David Harper CFA FRM, I wanted to start a new topic which has not yet been discussed in great detail. Jorion mentions on page 170 that a particular new trade involves a position in one risk factor (asset). The portfolio value changes from the old value of W to a new value of W(p+a) = W +...
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    Repost to David's Tweet about the VIX

    Hi @David Harper CFA FRM, Coincidentally I came across the following two interesting contributions at MarketWatch and CNBC about VIX and correlations; it is worth to have a glance at them: 'Jeffrey Saut, chief investment strategist at Raymond James, comes to that conclusion using a little...
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    Yield curve developments. Some theory

    Hi All, just stumbled over the following excellent sequence of papers (readings); one is officially accesible on the web, published by Antti Ilmanen (he is now with the prestigous AQR fund management shop) back in 1996 while being at Salomon Brothers (which is defunct as we all know from the...
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    Econometric meaning/interpretation of the intercept term (except the CAPM definition)

    Hi @David Harper CFA FRM, I want to kick off the following discussion about the intercept term in an OLS regression (except our well known and familiar interpretation in a CAPM setting). In case an OLS regression yields a positive or negative intercept which is significant what does this imply...
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    Linearity in regression parameters (alpha, beta) - application question

    Hi All, Hi David, I would like to reach out with a perhaps very straightforward/easy question but I want to be reassured about the following: Linearity of the OLS regression is not one of the Gauss-Markov conditions, however, non-linearity often happens in fields like labour economics: age vs...
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    Retail vs. corporate credit default (time of default)

    Hi David, I would like to ask the following: some reading in Part II (either Malz, Crouhy, Stulz Golin or Hull) mentions something about the time of default. Could be another author as well but I guess it must be somewhere in the aforementioned books. It goes something like this: for corporates...
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    Deriving the Variance–Covariance for the Entire Stock Portfolio

    Hi All, I just wanted to reach out to all of you with an update about the Var-Cov matrix derivation. There is one learning question (64.2 I suppose) given in David's notes and I stumbled over this topic again in my work now after some time and would like to update you with some useful piece of...
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    FRM Handbook - Tips and tricks

    Hi All, some of you may have encountered my forum posts recently and all my detailed explanations. I started working/writing on some kind of 'FRM manual' (or whatever I will call it in the end - it could even become a book in the long run) in the last few months elaborating on derivations...
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    GARP ERP (Energy Risk) Exam

    Hi All, has someone already tried to tackle the ERP exam? Irrespective of the exam itself, what do you think about the value-added of this program? Would be great to have your feedback on this. Many thanks!
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    Cash-funded vs. syntethic CDO (borrower consent/notification)

    Hi All, I wanted to raise the following topic and share my insights about Cash-funded vs. syntethic CDO and whether one of these requires the borrower notification/obtaining borrower consent? This could be of one of these tricky questions in the exam (similarly engineered questions have turned...
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    What’s Wrong with Multiplying by the Square Root of Time?

    Hi All, I just wanted to share an important topic which is unfortunately completely neglected in the GARP curriculum. Under the assumptions of i.i.d we know that the following properties apply to the scaling of mean and variance (volatility) - I am referring to C. Alexander 'Market Risk...
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    Jorion (Table 7-4 'Risk Minimizing Position') - Final Position weights

    Hi David, Hi All, I am referring to Jorion Chapter 7 (Portfolio Risk), 3rd edition: Perhaps this one is straightforward, but I can't solve for the changed weights (final positions) for the CAD and EUR (85.21% and 14.79% respectively). I got the marginal VaR (CAD = 0.0528) and (EUR = 0.1521)...
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    Tuckman - Vasicek model (equation 9.9 - 9.11)

    Hi All, Can someone please explain where the initial short rate (5.121%) in equation 9.11 (Tuckman,page 264) is coming from? I can't see any derivation nor I can't get to this myself. Equation 9.10 stipulates how to get the long-run value of the short- rate, but the initial short-rate (5.121%)...
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    Vol. Skew (Smirk) - Question

    Hi All, perhaps quite a simple question. I just read through the following CFA article http://www.cfapubs.org/doi/full/10.2469/dig.v41.n1.2 and now I am wondering whether Vol. Skew and Vol. Smirk can be used 1:1 interchangeably? Is there any difference between these two terms? Vol Skew = Vol...
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    LaR vs. VaR (LaR < or > VaR) - K. Dowd

    Dear David, I came across the following statement in Dowd's book: 'the LaR can be much greater than the VaR or much less than it, depending on the circumstances' What does Dowd mean by 'depending on the circumstances' and are there any examples for narrowing down the term 'circumstances'...
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    LVaR (BIS paper - Bangia, 1999) - Cost of liquidity vs. Dowd's cost of liquidity

    Hi David, I stumbled over the following two (confusingly) different calculations for the cost of liquidity (CoL): comparing the BIS equation (original paper: BCBS_wp19) on page 14 (http://www.bis.org/publ/bcbs_wp19.pdf) for exogenous liquidity and the formula used by K. Dowd (and in your...
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