Search results

Hi, A positive correlation of 0.13 is assumed between the EUR Spot and the long EUR bill. If the EUR Spot gets higher than also the price of the EUR bill increases, which means the EUR interest has been decreasing.

Hi Nicole, Thank you very much. Please let it accrue.

The odd thing is, that there is no mention of embedded options in the core readings, but a learning objective "Describe the impact of embedded options on the value of fixed income securities". I guess its some legacy objective from another edition, or was I just to dumb to find it?

Maybe you found you're answer already, but I just finished the chapter and feel inclined to test my newly acquired knowledge. The equations for calculating the hedge are: F(0.5) + P(1.0, up) * F(1.0) = 0 F(0.5) + P(1.0, down) * F(1.0) = 3 with P(1.0, up) = 0.97324 the price of the 1y bond...

Last year i could download all Articles that I wanted from GARP (for money). But I just tried, the new 2015 chapters are indeed not available online. @murrayf: i would mail GARP and ask them if they plan to put these chapters up there anytime soon. Maybe its just a matter of a few weeks.

I wrote: Actually now I think it must read: If we would have perfect correlations between the risk factors, it would be the true VaR. Perfect correlation is the worst case.

I can imagine, that we get a table like the ones mentioned before with the mapping already done. The task would be for example to calculate undiversified VaR. Or maybe we have to do the mapping on risk factors for a bond portfolio. I believe doing the mapping for other products or calculations...

Hi Tosuhn, GARP seems to change the table numbering to fit their chapter numbers. So I will just assume your table 11-6 is my table 5-6 in the core readings (Risk and correlations for Forward contract risk factors). The Forward contract will be mapped on the following 3 risk factors: EUR Spot...

Hallo Thomas, you are right of course, the question was about procyclical VaR. I did not read carefully enough.

As I understood it, the VaR is countercyclical because rising asset prices will normally result in a lower VaR (assuming a portfolio long the assets). If you use historical simulation you will see less days with a loss and normally also less severe losses. Of course you can find counterexamples...

re: "re: "you and Dowd seem to have a different interpretation."" I was unclear, I meant yours and Dowds interpretation differ from mine. Since I don't know Dowds book and you do, I just assumed you are in line with the book. Indeed I like your knew wording of the question better than the old...

Hello David, Thanks for the interesting link, I skimmed over it. You wrote: ------ begin citation ----- As he himself states, X and Y are portfolio P/Ls but can be future cash flows. They are already future expected values, E(.), such that it is equivalent to say: Monotonicity: if E(Y) ≥ E(X)...

Hallo David, I understood the practice question as stating the following: If you have two portfolios X and Y with the same variance, but Y has higher return than X, than you can deduce from monotonicity of rho(.) that rho(X) >= rho(Y). I interpret Y having higher returns in the context of this...

Hello David, thanks for the clarification, I will ignore the mentioned practice question then. @translation invariance: if X is P/L than X+c is adding cash and the risk is reduced. On the other hand if X is L/P then X+c is adding loss and the risk is increased.

Brianhfield and David thank you for your answers. If I understand that correctly, then Dowd uses X and Y as portfolio P/L while others define them as Losses. The two definitions differ in the sign. That seems to cause the confusion about the < and > signs in the monotonicity condition. This also...

In my opinion the Kaplan books are fine for Part I, especially if you complement them with BT. In some topics I found the Kaplan books a little too superficial, but in this instances you can always look into BT. In the worst case you can buy the article you are struggling with from the GARP...

Hallo, I got stuck on practice question 4. in the study notes for Chapter 3 of Dowd. 4. Portfolios (X) and (Y) each have volatility of 20%, but portfolio (Y) has a higher return and therefore its absolute VaR is lower; i.e., Absolute VaR = - return * T + deviate * volatility * SQRT(T). Which...

I ignored the part about order statistics, since that is not referenced in the learning objectives. About bootstrapping I limited my readings to the description of the general algorithm. I doubt that the formulas for estimators or standard errors will be tested. But of course, what do I know ...

That did cost me some extra time too. Eventually I also decided that it was an error and should have read 0.8 instead of 0.9. Took me awhile though. For the question with the scatter plot that indicated negative correlation, it was asked about the standard derivation of the sum of two...

David, thank you for confirming my suspicion. I agree, that the sample mean and the threshold are both 30 seems somehow suspicious. It feels as if it should mean something, but than it doesn't seem to.