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Hello, I found the problem I was referring to when I initially asked this question. It is 68.1 in the market risk section. The question asks about the present value of P/L, it is from Ch 3 in Dowd. I guess my question is: would we ever use this concept unless we were explicitly asked for the...

Sorry about that. I print all of the questions and then make a list of things that I either didnt understand or did not sound correct. Next time I wil reference the question. Thanks! Shannon

question 28.2. Thanks! Shannon

Hello, In one of the questions, you say that the duration of zero coupon bonds in not monotonically increasing with time. The graphs in the chapter show this for "deep discount" bonds, but shouldn't the duration always be increasing for a zero coupon bond? Dmac is just the maturity, and Dmod is...

I am in NY but I am not on Linkedin.

Hello, I have read a few times that guarantee fees can be "bought down" or capitalized but I have no idea what this actually means. Is there an example that will help me understand this concept? Thanks! Shannon

The duration of both of these make perfect sense, although it still seems like a REALLY high increase in yields would give the IOs a positive duration (assume zero refinancing at that point and high discout rates, I would think this could decrease their value), but that may be beyond our scope...

Hello, Do IOs ever have positive convexity? I have seen the P/Y graph for POs, but really cannot find one for IOs. POs have pos convexity at higher yields and neg convex at low yields but I am not sure at all what the P/Y graph for an IO looks like. Also, this may be a very dumb question, but...

Agreed that it is interesting and useful, but calling eta "elasticity of demand" when the common formula for "elasticity of demand" is its reciporical is just a bit on the confusing side. Thanks again for all of the help! Shannon

Hello, Am I crazy or does Dowd define the elasticity of demand incorrectly? Everywhere I look, elasticity of demand is the % change in demand due to a change in price. He defines it as the % change in price due to the change in demand. Yet another consistency issue we have to deal with. Garp...

Interesting. Thanks! Shannon

Hello, What exactly is meant by an "out of the money tranche on CDX and iTraxx indcies"? I know what the two indicies are, I know what a tranche is and I know what out-of-the-money means, but an "out of the money tranche on a CDS index" does not make much intuitive sense. Then you say that if...

Hello, What exactly is a collateralized loan? It is mentioned as a source of funding for Icelandic banks and I was wondering what the difference was between a secured loan vs a collateralized loan. Thanks! Shannon

Hello, Why would the Forex trading desk be under the treasury department? If the goal was ALM in foreign currencies I could understand that, but it seems like this was supposed to be an arbitrage desk. It just does not seem like it would (or should) have been under the "treasury" blanket...

Great explanation. Thanks! Shannon

As long as I know I am not missing something relatively straight forward I am OK with it. Just seems like someone decided to make it sound needlessly complicated. I think the AAA/info-insensitive idea goes back to the comparison of how anything with zero risk (cash, treasuries, etc) could tech...

Hello, The idea that a security is informationally insensitive is straight forward enough (treasuries, some AAA rated securities, etc). What I do not understand, is how a deposit in a bank is considered informationally insensitive debt. This "debt" is not directly sold to the public (maybe in...

Hello, Thi may be a really silly question, but I just read the Risk Budgeting chapter and they have a brief VaR backteting model at the end of the chapter. The idea is easy enough and makes perfect sense. What I am wondering is: if the portfolio outperforms too often (outside the confidence...

Hello, On p 85 of the notes you do not include any market charge for options, yet on p 104, you mention options in the list but do not include it in the graphic. It would make sense that they should be accounted for, but I was wondering where exactly they fit in. I assume they are part of the...

Hello, The idea of the ratio is easy enough, but when I am looking at a list of what we are "funding" it gets really confusing thinking about whether these are assets or liabilites. If we are long a long-term bond, we obviously have to fund that purchase, but we also need liquidity to pay off...