Bionic Turtle’s Week in Risk (ending November 12th)

It’s exam week! Good luck to all FRM candidates who are taking the exam this weekend! 🙂 This week, we’ve put together some links for you that include new practice questions that were posted to our forum (written by David himself, of course), new YouTube videos that David recorded and some great forum links!

New Practice Questions

• P1.T2.713. Uniform, binomial, Poisson distributions (Miller Ch.4) http://trtl.bz/2zH4tlr
• P2.T5.712. Backtesting value at risk (VaR) exceptions http://trtl.bz/2yJIytN

YouTube

• Information ratio (FRM T1-11) http://trtl.bz/2AElOrH

• Downside risk measures: semi-deviation, downside deviation, and Sortino ratio (FRM T1-12)  http://trtl.bz/2zTrMsz

In the forum this week (selected only)

• [general] Very common question, Will the exam provide N(d1) or do we need to know how to calculate  http://trtl.bz/2yNSX7T
• [GARP.2017.P1.51] https://www.bionicturtle.com/forum/threads/garp-2017-p1-51-garp17-p1-51.12366/
• [P1.T1] The Treynor exceeds the market’s excess return by exactly alpha/beta, α/β  https://www.bionicturtle.com/forum/threads/treynor-measure.12367/

• [P1.T1] Thank you forum member, berrymucho, for awesome explain of information coefficient and alpha  https://www.bionicturtle.com/forum/threads/information-ratio-v-t-stat-on-alpha.8860/#post-54911
• [P1.T1] How mathematically the non-systematic component reduces to zero as portfolio granularity increases  http://trtl.bz/2ypqqkH
• [P1.T1] Relationship between the single-factor model and CAPM  https://www.bionicturtle.com/forum/threads/r10-p1-t1-bodie_ch10_single_factor_model_vs_capm.12355/
• [P1.T1] How is the SML arbitrage portfolio determined? https://www.bionicturtle.com/forum/threads/r10-p1-t1-bodie_ch10_portfoloio_arbitrage_sml.12356/

• [P1.T2] What does the F-stat signify in a multivariate regression?  https://www.bionicturtle.com/forum/threads/multiple-regression-coefficient-testing.12368/
• [P1.T3] What determines whether it is optimal to early exercise an American style option?  https://www.bionicturtle.com/forum/threads/american-option.12328/
• [P1.T3] Fun, short question wrong-way risk https://www.bionicturtle.com/forum/threads/highest-exposure-question.12363/
• [P1.T4] Good exploration of the assumption that single-factor sensitivities imply parallel yield curve shifts  http://trtl.bz/2iSWBCv
• [P1.T4] On the sometimes counter-intuition of why the mean return (in Hull’s lognormal property of stock prices) scales DOWN with time http://trtl.bz/2hSP4nJ
• [P1.T4] Thank you to forum member, QuantFFM, for spotting a typo in our hybrid historical simulation (HS) exhibit that could create confusion https://www.bionicturtle.com/forum/threads/calculating-revised-var-hybrid-approach.9857/#post-54787
• [P1.T4] Good summary of swap rates as par rates by forum member, jcklam http://trtl.bz/2i0pjSf
• [P1.T4] Backward induction in the binomial option pricing model  https://www.bionicturtle.com/forum/threads/backward-induction-calculation.12317/

• [P1.T4] What is the impact of an increase in volatility on option delta?  https://www.bionicturtle.com/forum/threads/p1-t4-400-option-delta-hull.7651/page-2#post-54870
• [P1.T4] Questions about option theta (TBD) https://www.bionicturtle.com/forum/threads/p1-t4-403-option-theta-hull.7686/#post-54868
• [P1.T4] It’s hard to get the units right in portfolio volatility based on shocking key rate ‘01s (KR01s)  https://www.bionicturtle.com/forum/threads/p1-t4-320-multi-factor-analysis-partial-pv01-and-forward-buckets-tuckman-3rd-ed.6975/#post-54973

• [P1.T4] My VaR aggregation cheats on the HS VaR by using Excel’s PERCENTILE() function  https://www.bionicturtle.com/forum/threads/return-aggregation-var.12365/
• [P1.T4] Understanding why changes in coupon rate would impact yield  https://www.bionicturtle.com/forum/threads/r10-p1-t1-bodie_ch10_portfoloio_arbitrage_sml.12356/
• [P1.T5] Which measure of convexity is correct? https://www.bionicturtle.com/forum/threads/p2-t5-206-fixed-income-iii-mbs-topic-review.6044/#post-54843
• [P1.T5] Which non-parametric HS measures are “semi-parametric,” and which can produce a VaR/ES estimate in excess of the worst loss https://www.bionicturtle.com/forum/threads/l2-t5-80-filtered-historical-simulation-dowd.3699/
• [P2.T6] Why exactly is credit exposure like a short option position? https://www.bionicturtle.com/forum/…risk-terms-continued-gregory.7125/#post-54816
• [P2.T6] A classic GARP-type question on credit default swap (CDS) that requires a careful reading  https://www.bionicturtle.com/forum/threads/practice-exam-2017-p2-5.10428/#post-54760

• [P2.T6] Realistically it is unlikely that you will need to CALCULATE marginal CVA http://trtl.bz/2ypjYu5
• [P2.T7] The difference between P/L and L/P in VaR and ES https://www.bionicturtle.com/forum/threads/p2-t7-608-fundamental-review-of-the-trading-book-hull.9768/#post-54991
• [P2.T7] More discussion about Malz’ representation of an option (derivative) position on the economic balance sheet  http://trtl.bz/2AzB89b
• [P2.T7] On the interpretation of Hull’s worst case default rate (WCDR) in the one-factor Gaussian copula model of time to default https://www.bionicturtle.com/forum/threads/p2-t7-517-credit-risk-capital-under-basel-ii-hull.8480/#post-54773
• [P2.T7] Thank you to forum member, uness_o7, for identifying the equivalence between Dowd and Hull’s expected shortfall (ES)!  https://www.bionicturtle.com/forum/threads/p2-t7-608-fundamental-review-of-the-trading-book-hull.9768/#post-54774
• [P2.T7] Is Hull’s Worst Case Default Rate (WCDR) the same as credit VaR (CVaR)?  https://www.bionicturtle.com/forum/threads/p2-t7-517-credit-risk-capital-under-basel-ii-hull.8480/#post-54773
• [P2.T7] Does OpRisk VaR include expected loss? https://www.bionicturtle.com/forum/threads/p2-t7-306-operational-risk-basel-topic-review.6895/#post-54790
• [P2.T9] Why might a monetary sovereign prefer to default rather that inflate (aka, print money) to avoid default  https://www.bionicturtle.com/forum/threads/corporate-debt-in-emerging-economies.12338/