Hello,
I have just started with the first instructional video of part 2, covering market risk measures.
In the ES calculation, I do understand the concept, but what is confusing me after many hours of trying to figure it out, is the calculation of the tail VaRs. For example, for the 99% CL...
I have two questions concerning d1 and d2 as inputs to the BSM model.
1. I have read in other sources that in the exam you will not likely be asked to calculate d1 and d2 but instead be provided with these as inputs for the BSM calculation. That said you will need to look up the applicable z...
Hello,
I would like to ask what is the correct form of Z and t-statistics. If I am not mistaken it is
[mu-X(h)]/SE,
where mu = population mean, observed value or beta in case of regression and X(h) is the tested value or null hypothesis.
Are there any cases when the numerator should be...
Hi @David Harper CFA FRM ,
One formula I am struggling to understand is the adjustment to the z-score to account for the costs involved with the type I and type II errors ( => opportunity cost vs. LGD) in De Laurentis - Ch3 (Ratings Assignment Methodologies) pp 59 and 60.
ln(q(solvent) *...
Learning objectives: Apply the Merton model to calculate default probability and the distance to default and describe the limitations of using the Merton model. Describe linear discriminant analysis (LDA), define the Z-score and its usage, and apply LDA to classify a sample of firms by credit...
Hi All,
I have a question about the formula for Z-scores. I've seen the formula as:
a) Z-Score = (observation - mean) / standard deviation
and as:
b) Z-Score = (sample mean - population mean) / (standard deviation / SQRT(sample size))
Thus far, I've been using formula "a" above. When...
Hi David,
In your notes you specifically mention that we should assume a one-tailed test for the z-score component when we are valuing the exogenous spread cost, however in the Schwesser practice exams they use a two tailed score. I assume that they are incorrect in using this? Has GARP...
Hi David,
In the FRM handbook there is the following question:
"Assume that a random variable follows a normal distribution with a mean of 80 and standard deviation of 24. What is the probability that this random variable is not between 32 and 116?"
I think that it is required the z-table in...
Hello,
I have two simple questions about Alman's Z score I ws hoping you could answer for me.
Are we supposed to memorize the formula for this or just how to interpret it? It seem s a little silly to have to memorize a bunch of betas and their corresponding variables, but if that's what they...
Hi David,
here is your quote:
"Altman’s Z is the most famous type of linear discriminant model: borrowers are classified into high or low default risk categories. It does not directly give a probability of default (PD), although we can map to the > score to a credit rating and map the...
David and other fellow posters:
Do we get z-table and t-tables as an appendix on the exam, or do we have to memorize the critical values at certain confidence intervals?
(i know things like 1.645 come up a lot but I don't know the z-scores)
If we have to memorize, could you please again...
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