Bionic Turtle’s Week in Risk (ending September 24th)

We hope everyone had a fantastic weekend! David has found some really great articles for the “Week in Risk” this week, and he has also included some of our forum discussions and new practice questions. Last week we also hit a great milestone on our Facebook page! We hit 100,000 likes, and we are so thankful to all of our loyal followers! 🙂

New Practice Questions

Option spread strategies

In the forum this week (selected only)

Options, forwards & futures (Hull)

Lognormal

bootstrap

Banking and Regulatory (including BIS)

  • The Fed, a Decade After the Crisis, Is About to Embark on the Great Unwinding (wsj.com) http://trtl.bz/2wQQBiH
  • The great unwind begins http://econbrowser.com/archives/2017/09/the-great-unwind-begins “The Federal Reserve announced today that it will begin reducing the size of its balance sheet next month in very modest and deliberate steps. One reason the Fed is moving so slowly is that they don’t want a repeat of the May 2013 taper tantrum, in which a surprise hint that the Fed might slow the rate at which it would be growing its balance sheet led to a spike up in long-term interest rates. But there may also be another reason why the Fed is contracting its balance sheet so cautiously.

federal reserve assets

International

  • How Venezuela went from a rich democracy to a dictatorship on the brink of collapse (The government’s response to economic crisis is reshaping the nation)  https://www.vox.com/world/2017/9/19/16189742/venezuela-maduro-dictator-chavez-collapse “The country entered a deep recession in 2014 spurred by the drop in global oil prices, and cumbersome regulations on its currency are helping produce record-breaking inflation. The International Monetary Fund estimates that prices in Venezuela are set to increase more than 700 percent this year. Seventy-five percent of the country’s population has lost an average of 19 pounds of bodyweight between 2015 and 2016 due to food shortages throughout the country.

Technology, including FinTech and Cybersecurity

Equifax

  • Crisis of the Week: Equifax Hit With Massive Reputation Breach http://trtl.bz/2jYJYdc “Just terrible. Equifax’s public response to its breach affecting 143 million Americans remains one of the worst yet, serving only to exacerbate the crisis–and the company took over a month to plan it. It made pretty much every crisis communications gaffe in the book, systematically destroying public trust with every move,” says Davia Temin, CEO of Temin and Co.
  • [GARP] Signs of Acceptance and Maturity for the FAIR Model http://trtl.bz/2fjfjBP The FAIR model is briefly explained in this blog post https://www.risklens.com/blog/the-fair-model-in-90-seconds (for much more detail see http://trtl.bz/2hrt7LA)

Fair Model

Books etc

Enterprise risk management (ERM) including Governance

Case Studies and Companies, including Strategic or Reputation risk

Data science (primarily R), including Alternative Data

Alternative Data

Risk Foundations (FRM P1.T1)

  • On Complacency | Why Risk Management Always Matters  https://www.commonfund.org/2017/09/14/post-on-complacency-why-risk-management-always-matters/Don’t let widening spreads, struggling banks or investment manager fraud be your impetus for thinking about risk. Risk is cyclical. Ironically, complacency in risk management is itself a cyclical risk. The longer that a benign period persists, the greater and nearer the risk of taking your eye off the ball becomes.

Quantitative Analysis (FRM P1.T2)

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

Hedge

Market risk, including Equity Risk (FRM P1.T5)

  • Ep. 28: Larry Summers on Macroeconomics, Mentorship, and Avoiding Complacency https://medium.com/conversations-with-tyler/tyler-cowen-larry-summers-blog-secular-stagnation-twitter-421a69ed84c8  “Second, the VIX — people tend to underappreciate this. The volatility of the market moves very much with the level of the market. The reason is that if a company has $100 of debt and $100 of equity, and then the stock market goes up, it’s 50/50 levered. If the stock market goes up by $100, then it has $100 of debt and $200 of equity and it’s only one-third levered. So when the stock market goes up, its volatility naturally goes down. And the stock market has gone way up over the last 10 months. That’s a factor operating to make its volatility go significantly down.” This is the same leverage effect mentioned by Hull as one possible explanation for the implied volatility skew observed for equities.

Credit risk (FRM P1.T6)

Investment risk, including Pensions (FRM P1.T8)

  • Wall Street’s Newest Puzzle: What Passive Buying and Selling Means for Individual Stocks (wsj.com) http://trtl.bz/2hmI4SG  ETF ownership as a factor

Passive Buying and Selling

Current issues (FRM P2.T9)

next-financial-crisis

 

 

 

 

 

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