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Week in Financial Education (June 28, 2021)

Welcome to the latest WIFE. For Part 1, we wrote a new set of insurance company practice questions (PQs). I was recently asked how much insurance is assigned in the FRM. Surprisingly little. You might expect insurance to be prevalent in Operational Risk (P2.T7) but it makes but three appearances in all of Part 2. For the Part 2 PQs, I wrote a few sets of questions on Bodie’s style analysis, namely this is the attribution of portfolio performance into asset allocation versus security selection. Have a good study week

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Welcome to the latest WIFE. For Part 1, we wrote a new set of insurance company practice questions (PQs). I was recently asked how much insurance is assigned in the FRM. Surprisingly little. You might expect insurance to be prevalent in Operational Risk (P2.T7) but it makes but three appearances in all of Part 2. For the Part 2 PQs, I wrote a few sets of questions on Bodie’s style analysis, namely this is the attribution of portfolio performance into asset allocation versus security selection. Have a good study week.

1. P1.T3.21.5. Moral hazard and insurance company premiums https://trtl.bz/3qusAeF

2. P2.T9.21.11. Style analysis https://trtl.bz/3h4Zcc9

Portfolio Graph

Forum News

1. [FRM] Are the exam questions restricted to learning objectives (LOs)? https://trtl.bz/3w6qQK4

2. [P1.T3] Still don’t see how domestic/foreign distinction is helpful for interest rate parity (IRP) https://trtl.bz/3x15OxD

3. [P1.T4] The bond VaR risk factor is basis-point volatility https://trtl.bz/360d00Q

4. [P1.T4] Thank you bossland9 for identifying forward formula typo https://trtl.bz/3wZntpi

5. [P1.T4] This old key rate question by me is not good https://trtl.bz/3qwp5nX

6. [P2.T5] The investor coupon in a pass-through MBS has three components (interest, scheduled principal, and unscheduled principal due to prepayments) https://trtl.bz/35WAgNm

7. [P2.T5] The definition of expected discounted value in binomial rate trees https://trtl.bz/3h62WbY

8. [P2.T5] The effect of volatility and risk aversion on bond price https://trtl.bz/3jjLbsk

9. [P2.T6] Is counterparty expected exposure (EE) additive? https://trtl.bz/3y1D3Rg

10. [P2.T7] Does RAROC capture systematic risk? https://trtl.bz/3A65obh

11. [P2.T7] Is VaR good for ranking portfolios? https://trtl.bz/35XHMYh

Forum Response

Curated Links (items you might like)

1. Risk

Risk Model

 

2. Investing & Finance

Investing and Finance Graph

3. Data, Tech, Cyber & Defi

Before the organization decides to allocate time, effort, and money into building a data culture, it is important that they make sure to clarify three main factors.

  1. Define your value: Why does an organization exist, and how does it maximize value for its customers?
  2. Measure deviation: what type of data is available and needed, and how can it be leveraged to further maximize value for customers?
  3. Appropriate re-prioritization and intervention: What should the organization do differently to develop the capabilities to extract value from data at scale?

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