Week in Risk Week in Risk (February 24th)

[David Harper CFA FRM]

New Practice Questions

• P1.T4.907. The coupon effect and carry roll-down scenarios (Tuckman Ch.3) https://trtl.bz/2SJEeow
• P2.T9.907. The impact of fintech innovations on payment services and the changing landscape of investments (Gomber) https://trtl.bz/2NgXx2l

New YouTube

• Dynamic option delta hedge (FRM T4-14) https://trtl.bz/2SKVpG4
• Option gamma (FRM T4-15) https://trtl.bz/2SkUgAa
• R Programming: Introduction: Atomic Vectors (R Intro-01) https://trtl.bz/2EJyaDW First in a new playlist!

In the Forum

• [BT] We deeply appreciate the support we've received in regard to Wiley's defamation of our service, both on LinkedIn https://trtl.bz/2BB1ZEH and on our forum https://trtl.bz/2N8wZjM
• [P1.T1] Is Stulz's risk irrelevance proposition true or false? https://trtl.bz/2Ip6lVk
• [P1.T1*] Stulz on risk mis-measurement https://trtl.bz/2Iy5MZl
• [P1.T1*] Stulz on communication failures https://trtl.bz/2IwWCw9
• [P1.T2] Thank you @evelyn.peng for answering a question about Wold's theorem https://trtl.bz/2Ita7Nj
• [P1.T3] Good job @abhinavkhanna finding a more intuitive expression of the solution to net interest margin (NIM) https://trtl.bz/2Iwyg5u
• [P1.T3] How to interpret bid-ask (and pip spread) in foreign exchange (FX) currency quotations https://trtl.bz/2ItYWUr
• [P1.T3] With respect to foreign exchange (FX) quote, I much prefer the base/quote convention over direct/indirect https://trtl.bz/2IzQNOt
• [P1.T4] Absolute versus relative value at risk https://trtl.bz/2IvCD0D
• [P1.T4] Solving for discount factors https://trtl.bz/2In0Q9F
• [P2.T5] Do geometric returns assume dividend reinvestment and must they be less than arithmetic returns? https://trtl.bz/2IAL4YC
• [GARP PQ P2.T6] Prototypical question about directional tendency of delta-normal value at risk (VaR) error bias https://trtl.bz/2T5Ci9j
• [P2.T6] CDS Auction https://www.bionicturtle.com/forum/threads/cds-auction.22174/
• [P2.T6] Understanding Malz's simulation of credit value at risk (CVaR) for equity/mezzanine/senior tranches https://trtl.bz/2T6ab9Z
• [P2.T6] Gregory's graph of Correlation versus Size of netting set versus Netting Factor https://trtl.bz/2IvKsUq
• [P2.T6] The impact of collateral on credit exposure https://trtl.bz/2IwmoAq
• [P2.T6] The sometimes counterintuitive influences on the value of subordinated debt https://trtl.bz/2ImnZsO
• [P2.T6*] How does selective tear-up of transactions or variation margin gains haircutting by CCP works? https://trtl.bz/2T2RzaH
• [P2.T6] Meissner's calculation of portfolio volatility https://trtl.bz/2IBIhOZ

External

Banking and Economics

• Negative Yields Mount Along With Europe’s Problems https://trtl.bz/2IjCwW5
• The Dollar Is Still King. How (in the World) Did That Happen? https://www.nytimes.com/2019/02/22/business/dollar-currency-value.html
• Measuring Connectedness between the Largest Banks https://trtl.bz/2IyEAJN "To understand the difference between common factors and connectedness, think of financial institutions as boats anchored in the harbor. If the boats are tied together tightly, one boat sinking would likely take other boats down with it. However, because the rising and ebbing tides will rock all boats, regardless of how tightly they are linked, we need to filter out these common movements to measure the connectedness accurately."
• Bank Boards: What Has Changed Since the Financial Crisis? https://corpgov.law.harvard.edu/2019/02/19/bank-boards-what-has-changed-since-the-financial-crisis/
• Rewriting the rules in retail banking (McKinsey) https://trtl.bz/2IApzar
• Mobile banking heats up (Felix Salmon, still the world's best financial blogger IMO) https://trtl.bz/2IyfNFH

Case Studies (Deutsche Bank, Kraft Heinz, Theranos)

• Deutsche Bank Lost $1.6 Billion on a Bond Bet (WSJ) https://trtl.bz/2IrYiae
• At Kraft Heinz, a fed investigation and a $15.4B write-down https://trtl.bz/2TaXtXs It Shook the Food Business by Snagging Burger King, Kraft and Heinz. Now 3G Is Reeling https://trtl.bz/2T8i9PV
• "She Never Looks Back": Inside Elizabeth Holmes' Chilling Final Months at Theranos https://trtl.bz/2IvsOA1

Risk

• [ISDA] Legal Guidelines for Smart Derivatives Contracts: Introduction https://trtl.bz/2ImszHq
• How One Crash 10 Years Ago Helped Keep 90 Million Flights Safe https://trtl.bz/2Inu5Jo
• Password managers have a security flaw. But you should still use one https://trtl.bz/2TaXevw Related: Password Manager Showdown: LastPass vs. 1Password https://zapier.com/blog/lastpass-vs-1password/
• You Give Apps Sensitive Personal Information. Then They Tell Facebook https://trtl.bz/2TbgCZq
• Self-Driving Cars Might Kill Auto Insurance as We Know It (Without humans to cause accidents, 90% of risk is removed. Insurers are scrambling to prepare) https://trtl.bz/2IAOfjj
• [GARP] A Breakthrough Is Claimed in Systemic Risk Monitoring https://trtl.bz/2T75mxd
• [GARP] The Best Tool for Operational Risk Management https://trtl.bz/2TkTRlX
• [GARP] Regulatory Reporting – The Outlook for 2019 https://trtl.bz/2Tc29MN

Career

• The Coursera Community, a New Discussion Forum https://www.class-central.com/report/coursera-community/
• The Rise of the Mega-University https://www.chronicle.com/interactives/Trend19-MegaU-Main
• New Statistics with Python Specialization from the University of Michigan https://trtl.bz/2IHsO02
• Seeking the Productive Life: Some Details of My Personal Infrastructure (Stephen Wolfram) https://trtl.bz/2ItunhM

Quantitative

• Holy Grail for Bias-Variance tradeoff, Overfitting & Underfitting https://trtl.bz/2T7a6m8
• Monte Carlo Without the Math https://trtl.bz/2T71dJq
• Introduction to Discriminant Analysis (Part 1) https://trtl.bz/2T4u7tI
• What to do when your data fails OLS Regression assumptions https://trtl.bz/2T2L9Z9
• Option-Implied Skewness and the Momentum Anomaly (CFA Institute) https://trtl.bz/2TbDbwT
• The Impossible Mathematics of the Real World https://trtl.bz/2IyBYvt
• Essentials of Hypothesis Testing and the Mistakes to Avoid https://trtl.bz/2Iw2UfC

Data Science, Technology and Cyber Risk

• Excel to R, Part 1 - The 10X Productivity Boost https://www.business-science.io/business/2019/02/20/excel-to-r-part-1.html
• Aon’s Top Cyber Threats for 2019 Revealed https://trtl.bz/2IvWvRq
• How Blockchain Technology Could Disrupt Real Estate https://www.cbinsights.com/research/blockchain-real-estate-disruption/
• Lowball Prices on Stock Options Could Be Silicon Valley’s Juiciest Perk https://trtl.bz/2IwyhGP
• Cyber Risk Assessment: Moving Past the Heat Map Trap https://trtl.bz/2ILK7x1
• Once hailed as unhackable, blockchains are now getting hacked (MIT Technology Review) https://trtl.bz/2Itzoa6
• Machine Learning Yearning by Andrew Ng https://www.mlyearning.org/ 6 concepts of Andrew NG’s book https://trtl.bz/2ILMf7Z
• In the World of Money Laundering, Cryptocurrencies are a Footnote https://trtl.bz/2IyHbDN
• Derisking machine learning and artificial intelligence https://trtl.bz/2Tbf5CG
• The Anatomy of K-means https://trtl.bz/2Iyf1IM

Investing and Personal Finance

• Warren Buffet's annual shareholder letter http://www.berkshirehathaway.com/letters/2018ltr.pdf
• Howard Marks, CFA: Getting the Odds on Your Side (CFA Institute) https://trtl.bz/2IxLVte
• Earning in retirement: The new norm? https://think.ing.com/articles/earning-in-retirement-the-new-norm/
• January 2019 Data Update 9: The Pricing Game (Prof Aswath Damodaran) https://trtl.bz/2IzSMCp
• The Extraordinary Upside Potential Of Sequence Of Return Risk In Retirement https://trtl.bz/2IHpXEm
• Is an Obsession with Outcomes the Most Damaging Investor Bias? https://trtl.bz/2IyePtk