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.“

• Lloyd’s City Risk Index: $546 billion at risk from 22 threats   http://www.iii.org/insuranceindustryblog/lloyds-city-risk-index-546-billion-at-risk-from-22-threats/
• [book] Mastering Catastrophic Risk: How Companies Are Coping with Disruption   https://amzn.to/2JCilSP
• Credit Portfolio Management in the IFRS 9 / CECL and Stress Testing Era https://trtl.bz/2LCRSSs

• [GARP] The Importance of Risk Documentation https://trtl.bz/2sKaWa2
• [GARP] Reflections on the Financial Crisis: The Governance Factor https://trtl.bz/2sKDsZk
• An inside look at political risk and credit insurance http://xlcatlin.com/fast-fast-forward/articles/an-inside-look-at-political-risk-and-credit-insurance

Technology and Code (rstats)

• [MS] Update: Bitcoin, Cryptocurrencies and Blockchain https://trtl.bz/2sM7Tyr

• [book] A Quantitative Primer on Investments with R https://amzn.to/2JIHM52 (slides here  https://www.q36llc.com/think/investments/)
• Must know Information Theory concepts in Deep Learning (AI) https://towardsdatascience.com/must-know-information-theory-concepts-in-deep-learning-ai-e54a5da9769d

• Why We Need to Update Financial Reporting for the Digital Era https://hbr.org/2018/06/why-we-need-to-update-financial-reporting-for-the-digital-era
• Blockchain’s Once-Feared 51% Attack Is Now Becoming Regular   https://www.coindesk.com/blockchains-feared-51-attack-now-becoming-regular/
• [rstats] EasyER Version 1.2 https://sharpstatistics.co.uk/r/ggplot2-in-excel/

• [rstats] New R package explain: Providing interactive interpretations and explanations of statistical results  https://topics-in-r.blogspot.com/2018/05/new-r-package-xplain-providing.html
• [rstats] New chapter (Optimize the data-ink ratio) in awesome book (Data Visualization)  http://serialmentor.com/dataviz/optimize-data-signal.html

Personal Finance/Investing

• Some Things I’ve Learned Over The Last 30 Years http://www.broadswordcapital.com/things-ive-learned-last-30-years/
• The Hedgie in Winter https://www.aqr.com/Insights/Perspectives/The-Hedgie-in-Winter-

• The Future for Factor Investing May Be Different Than its Backtested Past https://trtl.bz/2sKLHog
• Rethinking Retirement Rules https://www.barrons.com/articles/rethinking-retirement-rules-1527898022
• The ‘Fiduciary Rule’ May Sound Boring, But Its Collapse Threatens Your Retirement (Bloomberg)  https://trtl.bz/2HBO7dq
• The Psychology of Money http://www.collaborativefund.com/blog/the-psychology-of-money/

Other

• Relative error in the central limit theorem https://www.johndcook.com/blog/2018/06/04/relative-error-clt/
• The odd reality of life under China’s all-seeing credit score system   http://www.wired.co.uk/article/china-social-credit
• Debt Clock Ticking (John Mauldin) http://www.mauldineconomics.com/frontlinethoughts/debt-clock-ticking