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Hi Janda88, Since you're mentioning this issue, let me try to tell you more about this. The probability of type 1 error is just exactly equal to the significance level (call it alpha as usual). So we can manipulate it easily as we like. If one feels like, for just any reason suits, to take a...

Now I'm sure that they mail the cert thru regular instead of registered. No matter what, USPS takes a lot of time to finish the job indeed. This comment is what I saw in most of the forums talking about USPS. This effect is more significant if the mailing destination is Asia. I guess my cert...

If the American put should be early exercised, what is its value? Of course X - S(t). But does it violate the lower bound P(t)≧X - S(t)? No! First, the lower bound is closed. It includes an equal sign. Second, and more importantly, if you see that P(t) > X - S(t) in the option market, that...

I think I know why I got stuck on the question. I know the lower bound of an American put is P(t)≧X - S(t). If it is better to early exercise the American put, then of course P(t) = X - S(t). But it is still consistent to the lower bound P(t)≧X - S(t). And it is also consistent to the lower...

What you said in the post is seeing what will happen when taking the limit T approaching infinity. How does it relate to the early exercise of American put? In addition, is it possible to make the argument without using Black-Scholes? What you're essentially saying (and most of the textbooks...

I got stuck on this question, why is an American put on a non-income paying asset could be exercised early optimally? I've searched for many sources, but all of them explain the reason as deeply in-the-money, rising interest rate, sth like that. Is it possible to use mathematical arguments...

Yeah~I got it right~XD Well, I'm a beginner only and I feel not very confident to myself to be frank. So I can just discuss what I know about and that's very limited. I found there're many talented people in this forum indeed.

In my memory, the magazine is reserved for individual members, and it charges a fee to read it. Because in last year I took the FRM exam for the first time, GARP gives a 1-year individual membership to me for free. So I only read the originally chargeable magazine for one time.

Philippe Jorion's FRM handbook contains the derivation method of implied correlation (he calls it the Margrabe model). He illustrates the procedure in Chapter 17. I want to copy his contents here. But I'm using cell phone online now so its difficult to write it here. I'll show you later when I...

Yeah you can use implied vols to be the value at risk input if you assume you can find a traded option on your spot assets. Similarly you can use implied corrs if you can find an exchange option on your spot assets in the market. Sorry for my unclear comments before.

Firstly, you gotta have options positions in order to have any "implied" volatility measures. If your portfolio only contains spot assets positions, there simply doesn't exist any "implied" volatility measures then. You just need to (and can) use historical volatility (historical standard...

Try to see the attachment. It's a zipped powerpoint file showing the procedure of using cholesky factors to generate 2 or more correlated random numbers. Ask me if you have any difficulties of understanding the powerpoint slides.

The optimal hedge ratio is just derived by the same principle of simple regression, so don't worry there is only one answer. You're welcome and hope you get the FRM exam passed!

d, a, b?

I also don't understand......where did you find it? Can you post the whole paragraph to see?

Oh I see what you mean..... Yeah becoz usually people won't consider hedging one exposure with two or more derivatives. People only hedge the exposure by using the futures contract with the highest correlation with that exposure. So usually you won't see any books or materials teaching people to...

In my part 1 exam last November, I remember I have done some questions about optimal hedge ratio using stock index futures. The question provides the stock portfolio beta as an input. So I guess the topic will appear in part 1. Actually, last time I found there were similar topic questions...

I'm not sure if my answer can help you but I'll try. For your first question, yes. If you long-term invest at the forward rates, then the return is equal to if you short-term invest at the spot short-rate and roll over. But in reality, you won't do this. Suppose you invest $100,000 at the...

I don't fully understand what you mean but I'll try to post my opinion anyway. Firstly I think that volatility measures are comparable if you use the same measure for all the asset classes. For example, the standard deviations of all asset classes are comparable because their unit is all in %...

In principle, there is only 1 risk-free rate. If not, you can make free money by arbitrage, which will push the 2 risk-free rates discrepancy to zero. For example, if risk-free rate A = 2%, risk-free rate B = 2.5%, then you can just borrow $$ at A = 2% and invest those $ at B = 2.5%, thus...