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I like the way you think. It goes back and forth between frustration and anger. As you said, the harder I work, the more frustrated I get. Thanks again! Shannon

Thanks! I try to look things up on my own before I ask anything. Most of the time I can figure things out on my own, but where there are discrepencies between authors or the text I am reading is THE authority on a topic and it still does not make sense I find that I have no other option but to...

I am sorry for taking up so much of your time! I guess I assumed that you had a bunch of people answering questions for you, but it does not seem like that is the case. Thanks again for all of the help! Shannon

Hello, Cope says a few things in this chapter that do not seem to agree with other readings and even itself. For one, he says that EVT can only be used if the same mechanism is responsible for all losses. He then says this is not realistic, but goes on to say how GPD can be used if the data...

Thanks! Shannon

Hello, I just noticed something a little strange with the RAROC calculation in the Crouhy reading. On p 533, he says that we are considering a loan portfolio worth $1B. However when he calculates the interest expense, it is only on $925 million, because the economic capital is $75 million...

Hello, There is a statement about liquidity risks that I am havgin trouble wrapping my head around. Thus is talking about OTC markets: Many different matching exposures increases market depth and decreases liquidity risk. A problem arises when there are huge risk concentrations that provide...

Hello, There seem to be multiple definitins of exactly what an asset swap is. Hull defines it one way, Culp defines it another. Online there are multiple definitions ans many contradict each other. Does the test use a specific definition of exactly what an asset swap is and the mechanics of...

Hello, In the Culp reading, there is a strange example he gives involving holdback and equity. He first says that direct equity issue is Credit enhancement or a form of OC . So if we issue 80MM in debt and 20MM in equity on 100MM in assets, the debt issue has 20MM in CE. That makes perfect...

Thanks. I have the same feeling about some of the quantitative stuff in Dowd, such as the VaR confidence intervals. Idea seems relatively straight forward, but parts of the algorithm are so tedious and just have to be memorized without adding a heck of a lot of value to your understanding of...

Hello, A friend who took the test In May of last year said that part 1 was much more quantitative than part 2. Is this true? If so, how should our preparation be different for part 2 than it was for part 1? I see lots of problems with long algorithms (cash flow for MBS) and/or complicated...

Hello, The idea of right way and wrong way risks seems straight forward enough. The only example I am having a tough time with is a firm "over-selling forward its future production" being a wrong way risk. I am not sure I see how the producer's diminished credit quality translating into an...

Well, you are doing a great job. I always learn more from a conversation thatn I do just from reading. Sometimes, asking what I consider a dumb question leads to some really interesting results. Thank you so much for helping me out! Shannon

That was awesome. I feel embarassed that I did not derive that myself.:oops: Thanks! Shannon

If I use Black Scholes with two different "d" terms I will get two different answers. In spreadsheet 6c1, even whe you say you are using the "Stulz method" you are not using the "d" that you use in your notes. My whole point is: when do we use the Stulz expression for "d"? You never seem to...

Hello, I am looking over the notes and in De Serv Ch 3. The k (or d) in the version of the Merton Model you show on slide 9 of video 6c does not appear at all in the chapter. I believe this is also the version that you have in the notes. I am looking at p 66 of the de Serv chapter. I believe...

Sorry about that. I will look through some of the old questions tonight and hopefully find it. My numbers were completely made up, it was just the fact that the future price was discounted that made it different than the other problems. By constant spot rate, I just meant that interest rates...

Hello, I appologize in advance for the vague questions, but I remember at some point doing a problem (I think it was from the market risk section) from part 2 where the rate of return was computed differently than most problems I have seen. It made perfect intuitive sense, but I was hoping you...

That was extremely helpful. Thanks! Shannon

Great points. The only reason that I brought up the approximation, is that in the case where the change is small (say 1 asset from a portfolio of 100) then the incremental would be very close to the component. Again using Jorion's 7-4, the component VaR (being Marginal VaR*amount of position)...