Bionic Turtle’s Week in Risk (ending June 10th)

It’s a new week, and we have some great things to share with you! David resumed writing fresh FRM practice questions last week. We post them in the forum on Mondays and Wednesdays. We’ve also added brand new YouTube videos! Make sure to subscribe to our YouTube channel so you don’t miss out on the newest videos each week. Our FRM forum will begin to get busy again now that everyone is gearing up for the November exam, so we’ve provided some interesting discussions from our forum also. We hope everyone has a great week!

New Practice Question (David resumed writing fresh FRM questions last week, they will publish on Monday and Wednesday each week)

P2.T7.800. Principles for the sound management of operational risk: governance. https://www.bionicturtle.com/forum/threads/p2-t7-800-principles-for-the-sound-management-of-operational-risk-governance.13950/

New YouTube

Volatility: standard deviation (FRM T2-21) https://trtl.bz/2kZFUa3

Cost of carry: investment commodities (FRM T3-13) https://trtl.bz/2sVcMUV

In the Forum

If you are looking to join a study group (for the November 2018 FRM exams), there is much activity in https://www.bionicturtle.com/forum/forums/part-1-frm-study-groups.94/ or https://www.bionicturtle.com/forum/forums/part-2-frm-study-groups.95/
Thank you karim for suggestions https://www.bionicturtle.com/forum/threads/bt-forum-enhancement-suggestions.13948/
Given the wide range of topics in Part 1, Topic 3 (Financial Product and Markets), are each of the topics highly testable? (although this could be asked of any of the major FRM Topics!) https://www.bionicturtle.com/forum/threads/testability-in-financial-markets-products.13951/
[P1.T3] Instructive bond pricing example. Did you know that you can use the TI calculator’s “Bond Worksheet” to retrieve the full (aka, cash) and flat (aka, quote) price of a bond? You might prefer to use this when the bond does not settle on the coupon date, although you don’t need to use this function: the manual approach supports an intuitive understanding https://www.bionicturtle.com/forum/threads/p1-t3-719-quoted-versus-cash-bond-prices-hull-chapter-6.10627/
[P1.T3] Thank you karim for contrasting the payoff structure of a bull versus bear spread https://www.bionicturtle.com/forum/threads/l1-t3-184-option-spread-trades-hull.4626/#post-60736

[P1.T3] Each futures contract has a different size (recall that size is a “specification,” along with asset quality, delivery and price limits). Which contract sizes should you memorize? https://www.bionicturtle.com/forum/threads/stack-and-roll-hedge.4724/#post-60705
[P1.T3] Hull’s EOC Question 12.19 on a principal-protected note https://www.bionicturtle.com/forum/threads/hull-12-19.13952/
[P1.T4] How to adjust Black-Scholes for a discrete dividend (you don’t need Hull’s DerivaGem, this can be handled with basic Excel) https://www.bionicturtle.com/forum/threads/hull-11-26.13927/ … and please notice (regarding Hull 12.18) that in the case of a currency option, the base currency’s risk-free rate is effectively a dividend.

Banks

BofA Taps Brakes on Risk, Spurring Banker Departures https://trtl.bz/2LFMzRY

Deutsche Bank’s Future Is More Fannie Mae Than Lehman by Aaron Brown https://trtl.bz/2JLf2Zp
Regulators Back Threshold for Swap-Dealer Registration at $8 Billion https://trtl.bz/2JLfaIn
The mystery trader who roiled Wall Street (ft.com, pdf) https://trtl.bz/2JNFTE2

Five Key Points from the Financial Regulation Relief Law https://trtl.bz/2JJqPr7 “It is not a major overhaul of Dodd-Frank, nor is it strictly a community bank law, as headlines alternatively suggest. In reality, it makes several meaningful technical changes—most notably by raising the threshold at which a bank is considered a systemically important financial institution (SIFI) from $50 billion to $250 billion—while keeping the main pillars of post-crisis regulation intact“
Why Banks Are Losing the Battle for M.B.A. Talent (More business-school graduates are opting for jobs in tech and consulting) https://trtl.bz/2LCrwQq
Underwriting Loosening for Conventional Conforming Loans https://www.corelogic.com/blog/2018/06/underwriting-loosening-for-conventional-conforming-loans.aspx
BIS Quarterly Review, June 2018 https://www.bis.org/publ/qtrpdf/r_qt1806.htm, includes: The credit default swap market: what a difference a decade makes https://www.bis.org/publ/qtrpdf/r_qt1806b.htm

Risk

Daniel Kahneman: Four Keys to Better Decision Making https://blogs.cfainstitute.org/investor/2018/06/08/daniel-kahneman-four-keys-to-better-decision-making/

Volatility Trading Is a Problem (It increases risk, harms the real economy and distorts the financial system) by Satyajit Das https://www.bloomberg.com/view/articles/2018-06-04/volatility-trading-is-a-problem
Crisis Readiness: Future of Risk Response… https://trtl.bz/2sOjb52
Understanding the New ISO and COSO Updates http://www.rmmagazine.com/2018/06/01/understanding-the-new-iso-and-coso-updates/
Airlines Raise Ticket Prices as Fuel Costs Surge (wsj.com) https://trtl.bz/2HCLaJB “Airlines have cut their use of fuel hedging to smooth prices compared with the last price spike, though they differ widely in their approach. American Airlines Group Inc. executives have long avoided hedges, while Southwest Airlines Co., the largest domestic carrier, continues to make wide use of them, which it said offers protection when prices are above $80 a barrel.“