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Looks to me like he's giving the portfolio std. dev. in absolute terms (e.g. $mil). If you take the portfolio std. dev. in percent, which is 1.4981% then multiply by 12 (since there is $12million in total) you get $0.1798m.

@surojitpalb Not sure I fully understand your question. The second bond has 1 year to maturity and pays semi-annual, so there is an additional cash flow in 6 months time (t=0.5) which needs to be taken into account. If you use the formula from the d(0.5) calculation, where Bond 1 does not have a...

In the case where there is overlap, I would suggest just memorizing one set of equations. I tend to find there is one set I prefer/find easier to remember and I just stick with that one. In the end, if you understand the concepts that the equations relate to they are much easier to remember...

The first equation is giving you the probability of default in year 2. The second is giving you the probability of default in year 2 conditional on there being no default in year 1. Imagine you are given a two year period and told there is a certain probability of default during this time. The...

I tend to think of Key Rate exposures in terms of Key Rate Durations. The principle is similar to that of Modified Duration except that the instead of moving the yield to obtain the price change you move a particular tenor point on the curve instead. It is quite common to bucket KRDs together to...

In my practical experience, idiosyncratic risk tends to take on a very specific meaning. In the context of a risk model it is the portion of the total risk for each issuer/entity that is not explained by the factors in the model i.e. is specific to that issuer/entity. Business risk is the risk...

I have both the IMC and the FRM. I would say that IMC is a very nice introductory qualification. It introduces some basic maths and mathematical concepts and would be a good place to start if you're a bit rusty. The volume of material is also much less than the FRM or the CFA so you can judge...

Just a simple rearrangement will give you r: Therefore:

Have you read the corresponding chapter in the FRM books or the BT readings? I suggest you read those first. It's a very basic question.

Pretty sure that being a bonds and derivatives trader itself means you're managing/assessing risk (at least I hope it does!) and hence also qualifies as relevant experience. Although as you say, only 2 months. From your description I would say that your 2 years will be counted as long as you...

I assume you mean the CAPM rather than CAMP! The term one or single factor model is a generic term where there is (as the name suggests) only 1 determining factor in the model. The CAPM is just a specific example of a single factor model.

Certified FRM Jan 2016

I always prefer to think of these formulas in terms of growth factors. What we need to work out is the growth factor between T+1.5y and T+2y which we can then convert into the corresponding rate. GFs (discrete) are defined as follows: where n is the compounding frequency (in this case 2 for...

@Nicole Manley I can't use any of those since I'm in the UK. If possible, please make a charitable donation to a charity of your choice instead.

I think this is a simple topic which causes significant confusion! Think about it from the regulators perspective, they want to establish a baseline of K * your average calculated VaR for the past 60 days but do not want to ignore significant VaR spikes which might indicate distress. Hence the...

For a portfolio of n bonds, for each KRD tenor, t, you calculate the portfolio market value weighted average simply as: where the weight, w, for each security, i, is its current dirty market value divided by the total portfolio market value.

Ok, that's clearer now. Case #1: Simplest Case Assumption #1: You already have the KRDs for each bond. Assumption #2: All bonds are priced off the same curve. You can simply use the market value weighted average KRDs for the portfolio as a whole to calculate the value change. Simply apply...

You might need to be a bit more specific. What do you mean by "how to analyze"? Do you mean how to use the KRDs or do you mean how to obtain them?

If the market believes that the recovery rate (not directly observable in general) has increased then that would be reflected in the market prices. What I'm talking about above is a situation where you're trying to obtain an estimate of the hazard rate curve (possibly for use in another...

Not quite sure what you mean. The market price has baked into it the market expectations of probability of default and recovery.