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There are a lot of past threads on this but I haven't seen any final conclusion given. Equity tranche value is positively correlated to PD If PD goes down, equity tranche value goes down It is opposite for a short position, yet int the text the hedge fund is losing money? Doesn't make sense

They are using an interpolated value

It looks like there is not much to know from a calculation perspective?

Hi, shouldn't this be in Investment Management section?

Is the funding motivation due to the fact that the bank uses the funding to originate more loans and issue more CLNs? Funding is great and all, but absent some kind of liquidity crisis what is driving the funding need?

If you go to the GARP text it is presented the same exact way. My intuition tells me that the asset value is used to calculate VaR because surplus returns are scaled by ROA but maybe @David Harper CFA FRM can explain better

Hi @David Harper CFA FRM The study notes say that "The overall high interest rates paid are expected to be offset by the gain on the notional exchange at the maturity of the contract, and this expected gain on exchange of notional leads to a significant exposure for the payer of the high...

https://forum.bionicturtle.com/threads/p2-t5-502-correlation-in-risk-management-meissner-chapter-1.8207/#post-43073

For 2., The spread decreased because as a purchaser of mezz tranche you are buying credit protection (for 0-3% default in this case) . If correlations decrease, the value of that protection goes down and becomes more worthless as correlation decreases

I think this video will help understand:

I am interested too since the lower correlations would imply that the equity trance would decrease froma long position perspective. I am also interested in how "Hedge funds had shorted the equity tranche (0% to 3% in Figure 1.7) to collect the high equity tranche spread. They had then...

I'm going by the feedback I'm reading in the feedback posts such as this: "Can't agree more, actually on Analyst Forum, people are saying the same thing! For this kind of exam, the level of difficulty in the Practice Tests and the actual exam is really far apart and the amount of material...

I'm not really sure how to answer this, given that the amount of detail in P2 seems to be insane. FWIW I haven't been spending much time on the Current Issues section.

I was looking at the pass rate info from the homepage link, and the data only goes up to 2014. Is there updated information somewhere? I am just curious to see what they are now since it seems like the exams have gotten much tougher.

Here is mine so far, there are plenty more that still have to be entered....

Hi, In the materials we are provided with Basel II, Basel II.5, Basel III - so if we are asked to determine whether a capital ratio is adequate are we supposed to assume fully phased in Basel III, meaning to include the countercyclical and other buffers? Also, it seems like Basel II.5 is...

I think the key takeaway here is that, assuming this is a large bank with millions of transactions, you won't be able to figure out a specific positin's recovery rate because that data gets lost. The reason why, I think, is that if a bank has 1000s of exposures with a single client, then they...

Hi, Does anyone know if we have to remember the formula for P&L for a hedge position ?

Thanks @Nicole Seaman ! I will take the Amazon gift card

It says In addition, as individual capital commitments to a hedge fund manager tend to be small in relation to the investor’s overall portfolio, it is critical that a hedge fund investment carries the same limited liability protection as buying shares of a...