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Hi @CanvasEcho Yes, that's a mess, you are correct. The margin of error (ME) = SE * t_critical where SE = sample σ/sqrt(n) such that ME = sample σ /sqrt(n) * t_critical. Therefore, sample σ = ME/t_critical * sqrt(n) = 5.23%/2.57 * sqrt(37) = 12.379%. And we can easily just test this with 7.55%...

@jchun8523 Yes @yLam4028 is correct: those pairwise correlations are purely assumptions (you would not be able to derive or replicate them!). They are colored in YELLOW which in our XLS does connote input assumptions. Thanks,

Hi @prianthar Rates should (almost) always be expressed in per annum terms; e.g. above the S(0.5) = 5.00% and S(1.0) = 5.15% are inputs and therefore they are per annum (aka, annualized). To discount discretely depends on the compound frequency and where k = the number of periods per year, the...

Hi @prianthar Yes that is correct. In market risk (what you are calling the book), "absolute VaR" as given by aVaR = -μ + σ*z has the positive drift offsetting the unexpected loss. But in liquidity VaR (LVaR) which adds the liquidity cost--if we are incorporating spread volatility--the "worst...

Hi @gregorius89 I'm not sure, I don't think that should be the case; i.e., our notes should match the current syllabus/LOS. We will take a closer look Monday, I won't have time today/Sunday (copy @Nicole Seaman ) ... Thanks, David

Hi @CanvasEcho MGRM Yes, that's correct. MGRM employed a stack-and-roll, as you (pretty much) show. But (to my knowledge) they never went to delivery in the futures market, which was their hedge. So, it was open the long stack, then next month "roll the stack" by closing that open position and...

@JMars7424 If the z(4.0) = 5.0% and z(5.0) = 5.30% with annual compound frequency, then f(4.0, 5.0) = 1.053^5/1.050^4 - 1 = 6.509%. Thanks,

Hi @agnibose17 Re "... shouldn't it be given as percentage points?". I respect that observation :) You are saying that context + the symbol "%" is insufficient to connote percentage points? Can't "%" refer to either. Or, does it really need to say "7.91 p.p." or 7.91% p.p" ? (per...

Hi @yLam4028 we do not expect individual assets to have 1.0 betas. As the theory here is very well-developed, I want to be careful about terms like "optimal." Here is a long note I wrote on the topic that you may find helpful...

Hi @JEste7201 I moved your question to the source, see above. The solution (at link) goes into detail.

Hi @enjofaes I agree, it's a mistake in the text and it should read .... I'm fond of triangle numbers (see https://forum.bionicturtle.com/threads/potential-error-in-p2-t5-mr-9-3-2-3-kendalls-tau-and-concordant-discordant-pairs.8209/post-33057). If you have N credits, the diagonal separates an...

@PMuir6307 We have many discussions about this under the "delta-normal" tag https://forum.bionicturtle.com/tags/delta-normal/ ; e.g., in particular good is this discussion https://forum.bionicturtle.com/threads/p1-t4-328-delta-gamma-value-at-risk-var-allen.7203/ And I have a video on...

Thank you @enjofaes and @Nicole Seaman FWIW, based on my look, you are correct that two readings have been removed. Specifically, the prior LOS guide contains the following four readings at the end of ORR, but two are duplicates. Notice their numbering scheme was whacked at the end...

what's your answer?! :)

Hi @PMuir6307 "Effective" implies you want to select a yield shock and re-price the bond. Here are my videos on each: https://forum.bionicturtle.com/threads/t4-34-fixed-income-effective-duration.22507/ https://forum.bionicturtle.com/threads/t4-37-fixed-income-effective-convexity.22527/ I don't...

Hi @JLafr0337 Exactly, "Absolute VaR" refers to worst expected loss relative to the initial position and so includes the drift: aVaR = -μ + σ*z. Also, it looks like that exhibit assumes T = 252 trading days. Thanks,

Hi @CanvasEcho In Astras #1, the unconditional P(B) = 12% + 42% = 54.0%; retrieved easily by summing the two joint probabilities in the top row within the 2*2 probability matrix. If we asked the analogous question in Astra #2, the answer is the unconditional P(B) = 15% 30% + 5% = 50%; ie...

Hi @JAbdo9644 Yes, you are correct. In fact, you can see a similar example via a question that I recently wrote here at https://forum.bionicturtle.com/threads/p1-t3-23-1-corporate-bond-issuance.24359/ i.e., The solution is captured in my XLS (file attached). See how I check (reconcile) the...

Hi Jamal, That's actually a great question: exam-wise some never notice the realistic problem is retrieving full/flat settlement price between coupons because the problems tend to query t = 0 pricing. Yes, should absolutely can discount the cash flows per your "irregular" (but totally correct!)...

Hi @JAbdo9644 Can I slightly edit your question to this: I do that to distinguish between "par yield" and "yield to maturity"; aka, "yield". The answer is, No. The 5-year par yield is a function of the zero-rate curve (vector) including all zero rates (including the 5-year zero rate). What's...