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Learning objectives: Derive forward interest rates from a set of spot rates. Derive the value of the cash flows from a forward rate agreement (FRA). Calculate zero-coupon rates using the bootstrap method. Compare and contrast the major theories of the term structure of interest rates...

HI Tejas (@tejasips ) We would love to help you with this, but Nicole isn't allowed to evaluate work experience. Only GARP can do that. I'm sorry :( Thanks and ... good luck, David

Thank you @gsarm1987 that is such helpful insight (I didn't even think about the font size!) Hi @LBela4498 Welcome! Thanks for the question/feedback. We don't often get the criticism that the notes are too dense. (I will punt the VS question because I don't have an immediate answer on VS)...

HI @enjofaes I think that's a reference to Gregory's example (later) in "6.4.4. Netting Impact on Other Creditor". See diagram below. The base case (on the left) is without netting where B's position with respect to ... Party A (Derivatives creditors) is Asset = 140 and Liabilities = 200, and...

HI @MAli9983 On YouTube, I pinned my comment that explains those calculations: ... then, of course, once we've solved for 38.26 we can see that $63.763 - $38.26 = $25.51. I hope that's helpful!

Learning objectives: Explain the drawbacks to using a DV01-neutral hedge for a bond position. Describe a regression hedge and explain how it can improve a standard DV01-neutral hedge. Calculate the regression hedge adjustment factor, beta. Calculate the face value of an offsetting position...

Hi @Shau_2207 Yes, we have some fantastic help on videos (as we speak) so we will be updating Investment Risk (please don't quote me on which exactly WITHIN investment risk but we will update investment risk). Thank you!

Hi @Shau_2207 Re last paragraph of page 51, apologies but I can see we made a mistake and it should match what Ang says (emphasis mine): "The beta anomaly is not that stocks with high betas have low returns—they don’t. Stocks with high betas have high volatilities. This causes the Sharpe...

Learning objectives: Describe how equity correlations and correlation volatilities behave throughout various economic states. Calculate a mean reversion rate using standard regression and calculate the corresponding autocorrelation. Identify the best-fit distribution for equity, bond, and...

Learning objectives: Define and contrast exotic derivatives and plain vanilla derivatives ... Identify and describe the characteristics and payoff structures of the following exotic options: gap, forward start, compound, chooser, barrier, binary, lookback, Asian, exchange, and basket options...

HI @GEBEN9829 Lately the exam has been giving the contract sizes in any futures contract question; and I continue to believe that a good question provides the assumption so you don't need to memorize. However, among my original list over a decade ago (yikes!) Just to be "safe," I'd still...

HI @PMcAt5366 Yes, the intention is to include all spreadsheets, but to be candid, I'm a behind on updating them. It is something I am currently working on: updating the XLS to include all of our best work. Will keep you posted ... Thanks!

HI @frogs It is straight-up (literally) from Dowd's example in his Chapter 4. Matrix A is defined by Choleski's decomposition; in Dowd's Chapter 8 he more clearly defines it so if the historical correlation, rho = 0.30, then you can below (my super quick XLS below) how A*A^T = correlation...

HI @yukoc100 GARP is correct. If the question were instead "What is the conditional probability of default during the second year?" then the answer would be 10.03% / (1 - 0.12*1) = 11.3%. But the questions asks for the joint (aka, unconditional) probability of default during the 2nd year, such...

HI @JGURR5668 Here are the two sheets (but keep in mind that the simulated panel has random numbers so generates a new set each time) https://www.dropbox.com/s/udmnbogicmejhzx/3rd_4th-moments.xlsx?dl=0

HI @JGURR5668 Not errors. For skew, notice I matched to Excel's skew per the "Excel F()" below; the sample skew shouldn't be smaller than the population skew (0.198 <? 0.201). So the adjustment used is 19.8*100/[(100 - 1)*(100-2)]/1.0^3 = 0.2040x and this sample skew is greater than the...

Hi @viswa27 sorry, it's not a question I can help with because I don't agree with the language. On the one hand, it's too simple, but on the other hand, it's too sloppy (i.e., X, actual Y, conditional given X < 1,300 ... WTH). It's just not a good question and, thankfully, nothing like you'd see...

Hi @Jackk90 Mainway is hedging the loan (to which it has credit risk exposure) as a TRS payer: if the loans drops in value (aka, it's underlying exposure) that the TRS is a hedge because the TRS counterparty pays Mainway; similarly, if the Loan increases in MTM value, then Mainway would pay with...

Hi @ASche3191 There is a ton of discussion on this if you search the forum, but very briefly consider a portfolio with 100 credits (loans) and each has PD of 2.0%. If there is zero default correlation, the probability of (eg) at least one default is 1 - 98%^2 = 86.7%; i.e., a low default...

@mg30 From T3.C2 Summary: "Whole life insurance has mortality risk in that it becomes more expensive if the policyholder dies at a young age. Annuities have longevity risk in that they become more expensive the longer the policyholder lives" -- May, Bill. 2020 Financial Risk Management Part I...