Week in Financial Education (May 3, 2021)
Hello, welcome to another WIFE! Our FRM forum was super busy last week. I wrote a long reply to the question (link below) about the interpretation of foreign exchange (FX) quotes. We have experience here. This is one of many examples of where we (members in this forum) prompted a correction to GARP’s imprecise syntax references (in actual questions) to a “USD/EUR exchange rate”; e.g., 2016-P1-Q6. My advice is to disregard the domestic/foreign FX monikers because they are relative to each counterparty (so they don’t give you actual guidance). The proper FX quote convention syntax is base/quote, as in EURUSD (aka, EUR/USD) where the pair’s first currency is the base and the second currency is the quote (aka, price) currency. This may be initially confusing because EURUSD refers mathematically to the ratio USD/EUR, as in $X.XX US dollars per 1.00 unit of EUR. But it is ultimately convenient: given a quote of $1.21 EURUSD (i.e., EUR is the base), an increase in the quote (the number) refers to an appreciation in the base currency (it takes more dollars to purchase one Euro). The major currencies are ranked, with EUR as first, so by convention the preference is EURUSD and USDEUR is unconventional. If you really want to also use direct-versus-indirect, then know that a direct quote refers to a quote where your domestic currency is the quote (aka, price) currency, while an indirect quote refers to where your domestic currency is the base currency. Consequently, a quote of $1.21 EURUSD is direct if you are based in New York, but indirect if you are based in Paris.
New Practice Questions
1. P1.T2.21.3. Returns, volatility and non-normal distributions https://www.bionicturtle.com/forum/threads/p1-t2-21-3-returns-volatility-and-non-normal-distributions.23782/
2. P2.T9.21.3. Refining alpha in portfolio construction https://www.bionicturtle.com/forum/threads/p2-t9-21-3-refining-alpha-in-portfolio-construction.23784/
FRM PART 1
1. IT skills after FRM https://www.bionicturtle.com/forum/threads/it-skills-after-frm.23786/
3. [T3. Interest rates] Implied forward rates differ only due to the cosmetics of compound frequency https://trtl.bz/3vyKazC
4. [T3. Options] Impact of stock dividend on option price https://trtl.bz/3xEqrAh
5. [T3. Mortgage & MBS] Does negative convexity imply also negative duration? https://trtl.bz/3ecQkQg
6. [T4 CAPM] Does the Market portfolio include the riskfree asset? https://trtl.bz/339B408
FRM PART 2
3. [T6. Counterparty credit risk] (*) Exposure profile of CDS https://www.bionicturtle.com/forum/threads/p2-t6-413-credit-exposure-profiles-gregory.7774/post-88171
4. [T6. Extreme value theory, EVT] EVT GEV versus POT https://trtl.bz/3aWDcwr
5. [T6. Counterparty credit] Initial margin (IM) posted unilaterally versus bilaterally https://trtl.bz/3aY1GW1
6. [T7. OpRisk] Should a risk culture be profitable? https://trtl.bz/3nDIVfQ
7. [T7. Basel] What is procyclical amplification? https://trtl.bz/3xAz7b3
8. [T7. Model risk] If the confidence and horizon match, why would different people retrieve different one-day 95.0% value at risk (VaR) estimates? https://trtl.bz/3aUxPh6
Curated Links (items you might like)
1. 5 Tips to Making Board Risk Reports Meaningful Tools for Decision-Making (Carol Williams) https://trtl.bz/3edGe1d
2. Should we abandon risk assessment, risk management, and risk appetite? (Norman Marks) https://trtl.bz/3ukQqdW
3. COVID-19: Implications for business (McKinsey) https://trtl.bz/3nKVhTd
4. Why Business Interruption Risk Affects Us All https://www.brinknews.com/why-business-interruption-risk-affects-us-all/ Dirk Wegener is president of the Federation of European Risk Management Associations (FERMA)
5. Mitigating Risk for Asset Owners — Claiming Compliance with the GIPS Standards https://trtl.bz/3efLYaK
6. Six Strategies for Leading Through Uncertainty https://hbr.org/2021/04/6-strategies-for-leading-through-uncertainty
- With CECL in Force, Banks Remain Cautious on Loss Reserves https://trtl.bz/3nOL0FF
- Natural Language Processing Sharpens Its Focus on Financial Risk https://trtl.bz/3tg6Gf5 References some interesting Fintech/Regtech companies: Scienaptic Systems Inc, Eigen Technologies, Amenity Analytics, and Behavox
2. PRMIA Announces the Champions of the 2021 Risk Management Challenge https://trtl.bz/3efW7Ep
3. Emerging hydrogen industry can help tackle climate change. Managing complex risks is key (Allianz) https://www.agcs.allianz.com/news-and-insights/news/hydrogen-energy.html
DIGITAL (DATA, ANALYTICS)
1. FireEye’s M-Trends 2021 Report https://www.fireeye.com/current-threats/annual-threat-report/mtrends.html
2. The strategy-analytics revolution (McKinsey) https://trtl.bz/3efMcyC
1. Joachim Klement, CFA: Three Geo-Economics Trends to Watch https://trtl.bz/3tmOfpe “His latest monograph, Geo-Economics [CFA Institute], is a vastly ambitious endeavor.” He also writes a terrific substack at https://klementoninvesting.substack.com/
2. Rewriting the Rules https://www.brunswickgroup.com/judy-samuelson-new-business-rules-i18712/ Interview with July Samuelson of the well-regarded Six New Rules of Business
3. Book Review: Valuation (7th Edition) https://blogs.cfainstitute.org/investor/2021/04/29/book-review-valuation/
Week in Financial Education (May 17, 2021)
Welcome to another Week in Financial Education! This week saw some great questions and fascinating insights. I will just highlight the instructive example of a...
Week in Financial Education (May 10, 2021)
Welcome to the latest week in financial education (WIFE)! As the May exams have started, we experienced another busy week. We are grateful for some...
What Your Colleagues Are Saying
I took the exam in Sydney and had a similar feeling about the exam being more qualitative (but no less rigorous). However, I felt I was better prepared thanks to the BT's relentless focus on throwing real life examples and methods.
I subscribed to BT for my Part 1 FRM exam and just wanted to say thanks for the depth and breadth of the study materials and practice questions. I found out that I scored in the top quartile of every topic and I absolutely could not have done this without using BT - I spent many, many hours going over the practice questions and answers! I wanted to express my appreciation and gratitude to your team for your hard work in creating these materials. Thanks!
The BT scripts, practice questions, global topic drills and mock exams were a great help in understanding the concepts (which I could already apply on the job!) and where structured in such a manner that the breadth and depth where optimal for exam preparation - clearly the exam would have been a catastrophe without BT!
Passed first time. Happy all the hard work paid off. BT was the right choice. Thanks David and Nicole for your work and commitment.
Passed! 1,4,1,2,1,4! Thank you David and Nicole for your efforts! Thank you BT! Couldn't have done it otherwise. I'm a mechanical engineer who had a career in petroleum services, then I decided to switch career to financial risk management. Passed part 1 from the first time with top quartiles and passed part 2 from the first time as well. All with BT! BT is always the recommendation I give to people aiming at the FRM designation! Thank you again!
Passed Part I and Part II first time - absolutely could not have done it without BT. Like a few others I didn't even both buying the GARP books for Part II and went solely with BT materials. Just read, answered questions, watched videos, read, more questions, and... more questions! All the practice question taking looked to pay off. Thanks again Bionic Turtle for a great curriculum. Keep up the fantastic work!