Search results

HI @Shau_2207 That particular XLS is old (eg., YELLOW inputs may not match) but here it is (or a very close version). It's really based on Hull's excellent, accessible credit derivatives chapter. See attached. Thanks,

Describe the short-term rate process under a model with time-dependent volatility. Calculate the short-term rate change and determine the behavior of the standard deviation of the rate change using a model with time-dependent volatility. Assess the efficacy of time-dependent volatility models...

HI Antoine (@Tonio57 ) Yes, it's more than possible, it is expected. But I want to be careful about what we are saying. For me, this is true: At least some Part 1 knowledge is assumed (and required) for Part 2. You gave a great example of that: discount factors. You need to know discount...

Hi @HFlei5545 That's really interesting. I will say: from a mathematical perspective, I'm not convinced that the convention for the price/yield curve (i.e., price on Y-axis versus yield on X-axis) is necessarily "more correct" than the alternative. Further, it is my belief that: Price does...

HI @dla00 Yes, that's elegant because you are solving for μ - σ*z(α) = 0; i.e., μ = σ*z(α) --> μ/σ = z(α), or express via COV, 1/z(α) = σ/μ. ... and If we add the time dimension, sqrt(T), it applies at T = 1.0 year. But, to me, that's one of the two pathological conditions: they are also equal...

Learning objectives: Explain how the principles of arbitrage pricing of derivatives on fixed-income securities can be extended over multiple periods. Define option-adjusted spread (OAS) and apply it to security pricing. Describe the rationale behind the use of recombining trees in option...

Hi @Shau_2207 I think maybe you are correct, but any cursory search of this forum will show we've discussed it extensively over the years such that I wrote Gunter for clarification ("apparently you CORRECTED this in the second edition.") but he didn't respond. Here's what I wrote...

@yLam4028 yes, exactly, agreed. Thank you!

Learning objectives: Describe different characteristics of bonds such as issuer, maturity, interest rate, and collateral. Describe the mechanisms by which corporate bonds can be retired before maturity. Define recovery rate and default rate, and differentiate between an issue default rate and a...

HI @JMars7424 That looks to me like merely like the calculator is rounding (2nd FORMAT will show more decimals) the solution gives "-3.0%*-2.0%*30% = 0.0180%" and 0.0180% = 0.000180. I actually have my calculator set to 4 decimals and, indeed, this product returns 0.0002 but the calculator is...

HI @dla00 Thank you! In regard to the four cited errors, I agree with you: all four are mistakes and I just fixed them. Thank you! That's super great feedback. Re risk measurement video, I will take a look but I agree with GARP's Figure 1.2 (shown below): if losses are positive then the format...

Hi @enjofaes Yes, thank you! This mistake (these mistakes) for this LOS have been fixed, but the updated Note has not been published yet. ASAP. Sorry for the inconvenience.

HI @yLam4028 Say it were unrealistically perfect MA(1) series such that Y(1) = 1.5, Y(2) = 2.0, Y(3) = average(1.5, 2) = 1.75, Y(4) = average(2.0, 1.75) = 1.8750. Then your errors (aka, innovations) are e(2) = Y(2) - Y(1) = +0.50 per your schedule (notice that's the first actual innovation I can...

Hi @yLam4028 If you examine the example at https://forum.bionicturtle.com/threads/stock-watson-chap-7.13787/post-58778 ... It refers to a regression with three independent variables: TestScore = Intercept + PctEL*X1 + Expn*X2 + STR*X3 The unrestricted regression (where q = 3) generates a highly...

@yLam4028 Your question doesn't make a lot of sense to me (and could be time-consuming to decipher) because if your premise is true (i.e., if restriction = # of independent variables) then why are we applying the second formula with "restricted R^2"? I do not want to get us bogged down in this...

Hi @dla00 Great, thank you for those additional comments re translation invariance and homogeneity. I was actually aware of those mistakes because, as part of updating the notes, we go through the cited errors and they have been surfaced. Thanks again!

Hi @dla00 Yes that's our mistake in the video, in both cases. It should be as reflected in this video https://forum.bionicturtle.com/threads/t4-05-coherent-risk-measures-and-why-var-is-not-coherent.22464/

Hi @enjofaes Yes, agreed, my text was a bit whacked. Thank you! I have edited it to reflect text that matches the exhibit, as follows: Put simply, 97.0% ES is average of 3 worst (3%) losses: (64.28 + 63.27 + 36.41)/3 = 54.65 96.0% ES is average of 4 worst (4%) losses: not discussed 95.0% ES is...

David's Notes (2023-01-30) Re #2 [updated file = T8-R61-P2-Ang-Ch13-v9-1] Ang's observed return process: this is an error. Fixed. https://forum.bionicturtle.com/threads/errors-found-in-2021-2022-study-materials-p2-t8-liquidity-and-treasury-risk.23688/post-86952 Re #3 [updated file =...

Agree with @gsarm1987 and this ("You are compensated with a higher interest rate for tying up your money for a longer period of time") is interesting to me because I just wrote a fresh PQ set yesterday so term structures are top of mind, see...