Twenty new learning XLS

David Harper CFA FRM

David Harper CFA FRM
Subscriber
In preparation for upcoming video tutorials on FRM topic 4 (valuation & risk models), I built (either refreshed or newly constructed) 20 learning spreadsheets. I hope you noticed our new interface that allows you to filter the spreadsheet list by major FRM topic (e.g., 1=foundation, 2=quantitative) and/or relevance (green = recommended spreadsheet; yellow = optional but might be helpful; red = advanced or otherwise not critical).

We added the color-coding because for the full 2009 exam, we are on track to build 200+ learning spreadsheets!

http://learn.bionicturtle.com/images/forum/xls_filter_image.png

The following sheets have been added under the “valuation & risk models” topic:

4.a.1 Hybrid volatility (HS+EWMA): side-by-side illustration of historical simulation (HS) and hybrid VaR approach (combines HS and EWMA); the second tab uses actual recent Google (ticker: GOOG) price data

4.a.2 Taylor approximation Taylor series approximation used to re-price a stock option. Taylor Series is a key building block: delta/gamma and duration/convexity are both applied Taylor

4.a.3 Structured Monte Carlo: A new sheet with carefully a color-coded six-step process for Linda Allen’s structured Monte Carlo simulation. This sheet is tagged “red” because you don’t need to study it for the exam. But it applies at least three ideas: factor exposures; the generation of correlated random variables, and Cholesky decomposition. The second sheet performs the Cholesky decomposition and macros are not employed; I solved for each matrix element with “old fashioned” matrix math.

4.b.1 Binomial OPM: I expanded on this binomial XLS to include most of John Hull’s exhibits. This is tagged “green” because you can actually digest most of the chapter by understanding these models (including two American-style options).

4.b.2 Lognormal stock property: a collection of brief sheets devoted to the lognormal property of stock prices under GBM.

4.b.3 Historical volatility (Hull): a brief application of Hull’s historical volatility using recent price data for Microsoft (MSFT)

4.b.4 Black-Scholes (& warrant dilution): classic Black-Scholes-Merton and impact of warrant dilution

4.b.5 Dynamic delta hedge: Re-creation of Hull’s Table 17.2 and 17.3. A twenty-week simulation of maintaining a delta-neutral hedge

4.b.6 Greeks (call option): delta, gamma, vega, theta, rho

4.b.7 Greeks (put option): same on put

4.b.8 Implied volatility

4.b.9 Gamma-neutral

4.c.1 Discount function: bootstrapping the discount function and then (must know this!) extracting forward rates from the spot rate curve (spot rates and discount factors are directly related)

4.c.2 Maturity vs bond price & return: illustration of subtle points made by Tuckman that often give confusion

4.c.3 Yield to maturity: simple sheet that compares spot, forward and yield to maturity (YTM). Notice YTM is flat, must know this!

4.c.4 Pull to par

4.c.5 DV01

4.c.6 Durations (modified & Macaulay): a key sheet calculates and compares DV01, modified duration and Macaulay duration

4.c.7 Convexity

4.c.8 DV01 hedge: Tuckman’s example of a duration hedge
 

David Harper CFA FRM

David Harper CFA FRM
Subscriber
HI @PAnto2185 This post is < 13 years old. those spreadsheets are now distributed into their respective chapters in the SP. If you see an old one that you really want, I have a full dropbox (database) of all history, and I can get it for you ... but over the weekend or something, thanks! David
 
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