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  1. Nicole Seaman

    P1.T3.723. Swaps: valuation with OIS and LIBOR, comparative advantage, and currency swap valuation

    Learning objectives: Explain the mechanics of a currency swap and compute its cash flows. Explain how a currency swap can be used to transform an asset or liability and calculate the resulting cash flows. Calculate the value of a currency swap based on two simultaneous bond positions. Calculate...
  2. Nicole Seaman

    P2.T8.702. Macroeconomic risk factors including growth, inflation and volatility (Andrew Ang)

    Learning objectives: Describe the process of value investing, and explain reasons why a value premium may exist [BT note: this objective is somewhat out of sequence; the next practice question will review the value premium ]. Explain how different macroeconomic risk factors, including economic...
  3. Nicole Seaman

    P1.T2.703. EWMA versus GARCH volatility (Hull)

    Learning objectives: Apply the exponentially weighted moving average (EWMA) model to estimate volatility. Describe the generalized autoregressive conditional heteroskedasticity (GARCH(p,q)) model for estimating volatility and its properties. Calculate volatility using the GARCH(1,1) model...
  4. Nicole Seaman

    P1.T2.702. Simple (equally weighted) historical volatility (Hull)

    Learning objectives: Define and distinguish between volatility, variance rate, and implied volatility. Describe the power law. Explain how various weighting schemes can be used in estimating volatility. Questions 702.1. Consider the following series of closing stock prices over the tend most...
  5. U

    R16.P1.T2. Hull - expected value of u(n+t-1)^2

    In Hull - Risk Management and Financial Institutions, it is stated, in page 222 (10.10 using GARCH(1,1) to forecase future volatility), that: "the expected value of u(n+t−1)^2 is σ(n+t−1)^2". Is this something obvious? Can anybody explain why this should be the case? Thanks!
  6. V

    Implied Volatility

    Hello David, Can you please explain why the Implied volatility of calls is different from puts in real markets. As per Hull, the IV of call and puts have to be same. But when I look into actual markets, the data is otherwise. I tried to google around, but could not find a convincing answer...
  7. Nicole Seaman

    P1.T2.409 Volatility, GARCH(1,1) and EWMA

    Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual...
  8. T

    Square Root Rule with Mean Reversion & AutoCorrelation - VaR & Volatility

    David, I am now thoroughly confused by the Square Root Rule and scaling the VaR under the circumstance of Mean Reversion and Auto correlation. In search of an explanation, I found this thread http://www.bionicturtle.com/forum/newreply/1729/ , but your link is not attached anymore. The rules...