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Hi David, Thanks for all the guidance, patience in replying my queries though some of these queries are basic and all other helps that you give to me in my preparation for the FRM2009 exam. My reply to this -------“I passed the FRM2009 exam.” Learning (Chun Lee)

Hi David, Thanks for the patience answering my queries during the preparation for the exam. These replies really help in getting a firm understanding of the subject. The FRM questions are difficult. It tests the candidates time management, firm understanding and application of the...

My view are set out below: FRM CFA Risk Management More Debt Assets Neutral Neutral...

Hi David, Fr 2003 FRM exam, -Current USD/AUD rate is 0.6650 -USD riskfree rate is 1% -AUD riskfree rate is 4.5% What is the lower bound of a 5 mth European put option on the AUD with a strike price of 0.6880? Answer: Lower bound = Xe^(-USD rf x 5/12) - Se^(-AUDRF x 5/12) Lower bound...

Hi David, Question: An option on a stock has a payoff equal to the square of the positive excess of the stock price over the exercise price at expiration only if the stock exhibits an annual growth rate of 15% or more every year. Given the following assumptions and using a 3-step binomial...

Hi David, I just want to get a clearer understanding of these 3 concepts. What are the differences amongst these 3 concepts stress testing, scenario analysis and backtesting? Under what circumstances that they are used? Under what circumstances that they are not appropriate to be used...

Hi David, From 2006 past year question: -Portfolio Insurance Strategy -Portfolio of stocks not paying any dividends -Expectation: Assets price will decrease Answer: Sell an amount of index future equivalent to the change in the put delta x original portfolio value Clarification seek...

Hi David My understanding from the forum is set out below, correct me if I am wrong. Statement IV and VII Jan01 ---->F(Jan01)=S(July00)^storage cost*6/12 . . Jun01 ---->F(June01) = S(July00)^storage...

Hi David, 2004 FRM exam question. Let Z be a standard normal random variable. An event is defined to happen if either z takes a value between -1 and 1 or z takes any value greater than 1.5. What is the probability of event X happening if N(1) = 0.8413, N(0.5) = 0.6915 and N(-1.5) =...

Hi David, 2004 past year question. This statement is true ------"A symmetric distribution with 6% of area under the curve falling more than 2 std deviation from the mean has fatter tails compared to the normal distribution." Explanation offered in the answer: a normal distribution has...

Hi David, 2006 past year question Given two random variables X and Y, what is the Variance of X given Variance[Y]=100, Variance [4x-3y]=2700 and correlation between X and Y is 0.5? A. 56.3 B. 113.3 C. 159.9 D. 225.0 Answer: D. 225.0 How to solve this question? Your guidance...

Hi David, 2006 past year question Question: Let X be a uniformly distributed random variable between minus one and one so that the standard deviation of X is 0.577. What percentage of the distributions will be less than 1.96 std deviations above the mean? A: 100% B: 97.5% C: 95% D...

Hi David, This type of question is computational challenging. It takes more than 2min15 seconds to calculate the answer all the options. What is your advice in dealing with this type of question? Regards Learning

Hi David 2003 FRM exam Credit risk mitigation options security ranking 1) Cash 2) Letter of credit 3) Securities as collateral (which a hair cut parameter of 0%) 4) Parental guarantees Why LC is ranked higher than securities which has a hair cut parameter of 0% ( 0% hair cut is...

Hi David, 2003 past year question -a risky zero coupon bond maturing in one year -Answer: -the amount of risk capital required for this bond exhibits a hump shape - it first increases with asset volatility and then falls -formula: price of risky bond = price of riskfree bond + put...

Hi David, How many credit spread formula that the candidate is required to remember for FRM 2009 exam? Can we have a list of formula for FRM 2009 Level 2 also? I noted the following formula: 1) Slide9 - Credit Risk Measurement & Management 6.f - Stulz Credit Spread = -(1/T-t) X ln(D/F)...

Hi David, 2004 past year question The answer states that credit risk manager will uses a combination of current exposure, potential exposure and peak exposure to determine the amount of credit risk in derivative transaction. Could you explain further on what is current exposure, potential...

Hi David, Past Year 2006 FRM Question: Which of the following statement on their uses is correct? Answer: Real-world PD should be used in scenario analysis of potential future losses from defaults, but Risk-neutral PD should only be used in valuing credit derivative. Queries: Why we...

Hi David, Given (c) is not an answer. The best answer will it be (b) as below? b. The number of assets in the basket, N, increases and the default correlation of the assets becomes closer to zero. Thanks. Regards Learning

Hi David, Confidence level is also hard-wired into the risk weight function----right? Can you explain further on "scaling factor" of slide 65 - Operational & Integrated Risk Mgt 7.d? Thanks. Regards Learning.