Bionic Turtle’s Week in Risk (ending November 5th)

Check out this week’s newest practice questions, YouTube videos, and some great FRM discussions in our forum!

P2.T5.711. Age-, volatility-, correlation-weighed and filtered historical simulation (HS) approaches http://trtl.bz/2yoxodP
P1.T2.712. Skew, kurtosis, coskew and cokurtosis (Miller, Chapter 3) http://trtl.bz/2z9IX8k

[Fun] A quiz written by RiskManager316
https://www.bionicturtle.com/forum/threads/frm-challenge-free-100-question-test.12260/
[GARP P1] How exactly could certain securities have negative duration? https://www.bionicturtle.com/forum/threads/securities-with-negative-duration-garp16-p1-55.9969/#post-54528
[GARP P2] More discussion on default probability terms; e.g., why conditional PD equals first year unconditional PD if hazard rate is constant http://trtl.bz/2zalaVS
[P1.T1] Is VaR well-designed for non-market risk? https://www.bionicturtle.com/forum/threads/p1-t1-605-other-risks-topic-review.9723/#post-54697
[P1.T2] Is an AR(p) process necessarily covariance stationary? http://trtl.bz/2hzbmuv
[P1.T3] Does the long position in contango always incur a loss? https://www.bionicturtle.com/forum/threads/does-the-long-position-in-contango-always-incur-a-loss.12176/

[P1.T3] Thought-provoking comments (made me think about my language!) by forum member, jcklam, on how to think about the relationship between the forward rate and the expected future rate under pure expectations and liquidity preference theories
https://www.bionicturtle.com/forum/threads/l1-t3-162-interest-rate-term-structure-theories-hull.4525/#post-54505
{P1.T3] I don’t have a dynamic negative convexity XLS ready yet, but we do have Veronesi’s MBS pricer which is good http://trtl.bz/2lICmMx
[P1.T3] The relationship between S(0)=E[S(t)]*exp(-k*T) and the cost of carry model https://www.bionicturtle.com/forum/threads/l1-t3-167-cost-of-carry-and-normal-backwardation-hull.4547/page-2#post-54598
[P1.T3] In my opinion, from a modeling perspective, convenience yield generalizes the lease rate are these synonyms as both represent implicit ownership benefits
https://www.bionicturtle.com/forum/threads/discount-rate-and-growth-rate-in-commodities-futures.10762/

[P1.T4] Thank you to forum member, MisterDiaz, for correcting my mistake in regard to KR01 profile and its implication in a curve steepening. Very instructive!
https://www.bionicturtle.com/forum/threads/p1-t4-318-key-rates-exposures-tuckman-3rd-edition.6951/#post-54599
[P1.T4] Thank you to forum member, ccl, for pointing out that I probably can’t exactly extract forward swap rates (without an adjustment) https://www.bionicturtle.com/forum/threads/p1-t4-13-forward-rates-tuckman.4918/page-2#post-54526
[P1.T4] Why aren’t delta of forward and futures both 1.0, from the perspective of first derivative? https://www.bionicturtle.com/forum/threads/r25-p1-t4-allen_ch-2-3-topic-var_linear_derivatives.10576/#post-54537
[P1.T4] I also think Shroeck’s ULC formula has a tiny typo http://trtl.bz/2zdV1VO
[P1.T4] Spreadsheet example of (Hull’s) dilution caused by warrants
https://www.bionicturtle.com/forum/threads/warrants-study-notes-hull-options-futures-and-other-derivatives.12166/
[P1.T4] We recently did a video on scaling factor (applied to volatility or VaR) in the case of autocorrelated returns https://www.bionicturtle.com/forum/threads/square-root-rule-with-mean-reversion-autocorrelation-var-volatility.4463/#post-54539

[P1.T4] Which has higher yield, a 4.0% coupon $85.00 bond (ie, 15% discount) with 10 years to maturity, or the same with 15 years to maturity? https://www.bionicturtle.com/forum/threads/p1-t4-14-yield-to-maturity-ytm-tuckman.4940/page-2#post-54677
[P2.T5] The treatment and timing of forward start options; e.g., with dividend-paying stock https://www.bionicturtle.com/forum/threads/p2-t5-412-exotic-options-forward-start-compound-and-chooser-hull.7607/#post-54627
[P2.T5] On Margrabe applied to ESOs https://www.bionicturtle.com/forum/threads/l2-t5-11-nonstandard-american-options-hull.3398/#post-54597
[P2.T6] I’m happy to finally realize why Gregory’s expected exposure (EE) does not equal Dowd’s 50% expected shortfall (ES) when the variable is normal (I did expect them to be equal, don’t you?!) https://www.bionicturtle.com/forum/threads/p2-t6-207-counterparty-risk-credit-exposure-terminology-topic-review.6191/#post-54730

[P2.T7] What’s the difference between resiliency and slippage (great question!)? https://www.bionicturtle.com/forum/threads/p2-t7-512-market-liquidity-characteristics-malz.8406/#post-54668
[P2.T7] Really helpful argument by forum member, uness_o7, that refactoring code to remedy technical debt is not an operational risk loss http://trtl.bz/2h70jYH
[P2.T7] Role of run-off factor in Basel’s liquidity coverage ratio (LCR) http://trtl.bz/2z9d51d
[P2.T8] Thank you to forum member, uness_o7, for finding a better solution to our single-factor question http://trtl.bz/2zsV54Q

Introduction to the Quantitative Foundation of Risk – Present Value