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HI Brian, Is it really possible to invest ONLY IN idiosyncratic risk according to your question? From what I understand, everything else can be attributed to a risk factor.. From my understanding any asset can be broken into generic risk factors + idiosyncratic risk.. And more granular the...

Hi David, Jorion says : If current market value not fully allocated to risk factors, then remainder allocated to cash? Why is this is so? Is cash is a a risk factor? ( I dont suppose so).. Then why is the remainder allocated to cash? why can't this be idiosyncratic risk etc? Thanks, Kavita

Hi Brian, What do you mean by "larger samples".. do you mean sample size? Please clarify.. Thanks Kavita

Thanks everyone... Kavita

Hi All, Gregory mentions that difference between VaR and PFE is that PFE is associated with the gain ( right tail), whereas VaR is associated with the loss ( Left tail). But since right and left tail are mirror images in normal distribution, numerically VaR and PFE should be equal for a give...

Hi, Gregory says that 1. Exchanges do not fully eliminate counterparty risk.. Why is it so? is it because the exchange may default itself? 2. Clearing houses create Moral Hazard: Please explain how? 3. It is difficult to get rid of counterparty risk entire, may create more toxic assets? How...

Hi All, We know that VaR is not a coherent measure of risk because it is not SUBADDITIVE. In P2.T8. Jorion chapter 7, David mentions that "Note that portfolio risk must be lower than the sum of individual i.e VaR(p) <VaR1 + VaR2. so are we assuming here that the VaR is subadditive for...

Thanks Deepak..

In Dowd 3rd chapter video, David talks about absolute VaR with mean and relative VaR without mean.. Please can you explain me what is relative VaR and what is absolute VaR. And the VaR that we calculate using historical simulation is relative or absolute.? Thanks Kavita

Hi David, In your notes you have mentioned that:The effects of time-varying volatility on the accuracy of simple VaR measures diminish as the time horizon lengthens. In contrast, volatility generated by stochastic jumps will diminish the accuracy of long horizon VaR measures unless the VaR...