Bionic Turtle’s Week in Risk (ending April 2nd)

Happy Tuesday! We hope everyone is having a great week! This week’s Week In Risk blog includes some really great discussions from our forum, including some questions from past GARP practice exams. David has found some very interesting articles from the world of banking, political risk, cybersecurity, climate and energy and data science. He also includes articles pertaining directly to the FRM topics in the GARP curriculum. We hope you enjoy! 🙂

In the forum this week (selected only)

Bodie’s Market Timing Score

Malz' single factor model

Bank and banking

Big Banks Plan

Stock Market

  • Annual Banking Outlook Conference Highlights Opportunities, Challenges Facing the Banking Industry http://trtl.bz/2oRcB9I

Political and regulatory risk, including Systemic Risk (including BIS)

 

International

Financial system
China’s financial system

Australia's Economy

Technology, including FinTech and Cybersecurity

China Investments

Natural Science, including Climate and Energy

  • Pruitt on the Paris Accord http://www.factcheck.org/2017/03/pruitt-paris-accord/
  • Making Sense of Trump’s Order on Climate Change https://www.bloomberg.com/view/articles/2017-03-29/making-sense-of-trump-s-order-on-climate-changeThe $36 figure [i.e., $36 per metric ton of C02 reflects social cost of carbon; see https://en.wikipedia.org/wiki/Carbon_tax#Social_cost_of_carbon] reflects the global rather than purely domestic damage from carbon emissions. If the United States is imposing harm on China, India or France, that harm is fully incorporated in our regulatory decisions, leading to more aggressive regulation than would be justified with the purely domestic figure. The $36 figure also reflects harm done to future generations, while using an annual “discount rate” of 3 percent — meaning that in monetary terms, damage in 2080 is going be valued a lot lower than damage in 2017. The theory behind the use of a discount rate is that money today is worth a lot more than money in 50 years, because you can invest today’s money and watch it grow. The higher the discount rate, the lower the value of benefits that you get in the future.

Data science (primarily R), including Alternative Data

Machines

Personal finance

Borrowing Retirement

Other

Financial reporting, including Accounting and Audit

  • FASB Proposal Looks to Trim ‘Hedge Accounting’ Requirements (Agency would give companies more time to complete documentation, expand treatment to wider range of circumstances) https://www.wsj.com/articles/fasb-proposal-looks-to-trim-hedge-accounting-requirements-1490619600Changes in the price of derivatives that don’t qualify as hedges must be recorded in the income statement each quarter, which can result in large earnings swings. The result is that ADM’s losses on derivatives not designated as hedges reduced earnings by $352 million, to $1.28 billion in 2016.

Risk Foundations (FRM P1.T1)

Simplifying Risk Management

Quantitative Analysis (FRM P1.T2)

Financial Markets and Products, including Interest Rates, Commodity Risk, and Foreign Exchange (FX)(FRM P1.T3)

GM Common Stock

Flatter Yield Curve

Valuation and Risk Models, including Country risk (FRM P1.T4)

Best Investment

Credit risk (FRM P1.T6)

  • United States Residential Foreclosure Crisis: Ten Years Later by CoreLogic http://trtl.bz/0402-corelogic-crisis via Barry Ritholz who says: “Comprehensive data and analysis on completed U.S. foreclosures and foreclosure inventory: Fascinating report from Core Logic on the past decade, looking at from a national and state by state perspective. Definitely worth checking out the complete report (click on graphic below).

Highest Foreclosure Rate

Investment risk, including Pensions (FRM P1.T8)

Hedge Fund Terms

Current issues (FRM P2.T9)

Price Index

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