Bionic Turtle’s Week in Risk (ending June 17th)

We have a great blog for you this week with our newest practice questions, YouTube videos and forum discussions! We’ve also launched our new Airtable, which highlights over 4,000 practice questions that we have available for the FRM exam!

Our new Airtable:

New practice questions

New YouTube videos

In the forum

  • [P1.T1] Is it true that efficient portfolios are well-diversified, but well-diversified portfolios may not be efficient?  https://trtl.bz/2HWgl2w
  • [P1.T3] Overcoming the TI BA II+ calculator’s inability to accept non-integer periods in its time value of money (TVM) worksheet https://trtl.bz/2HWgsLu
  • [P1.T3] There is a pattern to solving a typical swap-gains-advantage question: 1. identify each company’s comparative advantage; this should be the external trade, 2. Use the share of net gain to determine each company’s net trade, 3. Size the swap accordingly https://trtl.bz/2K1ioHY

swap-gains

  • [P1.T3] Unless specified otherwise, assume interest rates are expressed in per annum terms. For example, “six-month LIBOR is 4.0%” refers to a six-month rate of 4.0% per annum   https://trtl.bz/2JZnvs4
  • [P1.T3] In a vanilla swap, the floating rate is observed at the beginning of the (six-month, in this case) period, but paid at the end of the (six-month) period; aka, the cash settles in arrears   https://trtl.bz/2K2ba6r
  • [P1.T4] A good and common question about Black-Scholes and dividends https://trtl.bz/2JUZXol The dividend subtracts from the stock price in both the “outer” and inner N(d1) formulas. Further, dividend can be subtracted in either lumpy or continuous form, but don’t do both because that double-subtracts! And, an option on a foreign currency is just a special case where the asset is a currency such that its “dividend” is its own risk-free rate  https://trtl.bz/2JWPZTb

0610-bsm-hull-eoc-1218

Banking and geopolitics

consumer prices

  • Geopolitical Uncertainty Wanes, Pushing Mortgage Rates Back Up  https://www.zillow.com/research/mortgage-rates-june-6-20258/ Geopolitical uncertainty spurs a flight to quality which puts downward pressure on longer-term U.S. Treasury rates such that “aspiring homebuyers in the U.S. are indirect beneficiaries of turbulent global politics.”
  • The Return of the Political-Risk Trade https://www.wsj.com/articles/political-risk-returns-to-markets-as-tide-of-stimulus-wanes-1528719648 I didn’t realize there existed a “widely used Global Economic Policy Uncertainty Index” found at http://www.policyuncertainty.com (methodology: “to measure policy-related economic uncertainty, we construct an index from three types of underlying components. One component quantifies newspaper coverage of policy-related economic uncertainty. A second component reflects the number of federal tax code provisions set to expire in future years. The third component uses disagreement among economic forecasters as a proxy for uncertainty.“)

Risk and risks

Careers

bank rankings

Investing

oil futures

Personal Finance

nerd's eye

Tech

blockchain

Quant

Books

Other

currents

  • Coastal High Tide Flooding Escalates, NOAA Reports  http://www.riskmanagementmonitor.com/coastal-high-tide-flooding-escalates-noaa-reports/ “The projected increase in high tide flooding in 2018 may be as much as 60% higher across U.S. coastlines as compared to typical flooding about 20 years ago and 100% higher than 30 years ago. This is due to long-term sea level rise trends and, in part, by El Nino conditions that may develop later this year.

 

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