Search results

Hi @gitusrini We think you do not need to know how to calculate GEV/POT for the exam ... see https://forum.bionicturtle.com/threads/p2-t7-804-extreme-value-theory-evt-approaches-dowd-ch-7.13994/post-74861 i.e.,

Hi @julienfrancaoui Yea this is a basic skill that is already much-discussed in the forum; e.g., see https://forum.bionicturtle.com/threads/probability-function.23487/post-83885 See below. The Z-lookup table gives you the relationship between N(z) = p; for example (see red below) N(-2.33) =...

No, they are in T4 but they should be also restored to T2 (GARCH is highly testable, a perennial exam favorite), see post and link at https://forum.bionicturtle.com/threads/p1-t2-324-estimating-volatility-topic-review.7277/post-83204 i.e.,

Hi @Akriti1 Yikes, I agree with you, this question is flawed. At a minimum, it seems the construction is insufficient. The answer is not (C). We should expect the Portfolio to lie on the SML because we can expect any portfolio to lie on the SML per my personal favorite distinction, see e.g...

I wanted to share some exciting news: Bionic Turtle has been acquired by CeriFi. You can read the press release here https://www.prnewswire.com/news-releases/cerifi-a-portfolio-company-of-leeds-equity-partners-completes-acquisition-of-bionic-turtle-301242071.html. I started BT over 15 years ago...

Thank you @RajivBoolell It's true @tornellFRM GARP allows for two valid IRs. In addition please see Note: https://forum.bionicturtle.com/threads/information-ratio-definition.5554/ or Video: https://forum.bionicturtle.com/threads/t1-11-information-ratio.21447/

Hi @Pandeyg Please see below; I did input GARP's T4 EOC 14.5 into my binomial XLS (see here https://www.dropbox.com/s/36lt46xkqgkf0k8/garp-t4-eoc-14-15.xlsx?dl=0 ) GARP's solution looks correct to me. The u = 1.1052 = exp[20.0% * sqrt(3/12)], so the annual (aka, per annum) volatility is being...

Hi @jwagner88 Thank you for sharing your email. Both of your concerns are valid (who could argue with either?). I do continue to be disappointed--over a decade later--that [apparently none of] the Trustees continue to be uninterested in "eating their own dog food." It is sort of astonishing to...

Hi @librosdeholanda You make a good point, strictly speaking the bias of the sample variance is negative: (n-1)/n*σ^2 - σ^2 =(n-1)/n*σ^2 - σ^2*n/n = σ^2*[(n-1)-n]/n = σ^2*(-1)/n = -σ^2/n ... although we barely need the math: intuitively, the biased (MLE) variance divides by n, while the...

Hi @etzaros 1. I think we just followed GARP's goofy example in 6.6 where implicitly the weights are $1.0 rather than 33.3%. Notice their equation doesn't square any weights in referencing their 6.1 [sic] and only subsequently assumes all loans are the same size. So I think we just assumed all...

Hi @danghara First, please note that any bilateral derivative contract always must have one counterparty who has zero credit exposure, right? Exposure = max(value, 0). If you and me enter into an interest rate swap, the initial value will be zero (aka, par transaction). Whichever way the rate...

Hi @NEichi The formula is correct per Hull (who is GARP's ultimate source here) ... ... but, I agree with you, GARP's interim formula has a typo. For the naked written call, it should be as follows (although the result is the same): max(5 + 0.2 * 47 - 3, 5 + 0.1 * 47) = 11.4. Great catch on...

Hi @Guannn the diversified portfolio VaR assumes the classic mean-variance framework (aka, MPT) which assumes returns are normally distributed (why? because it only cares about means, variances and correlations; not skew or kurtosis). The normal distribution is subadditive: mixing assets with...

Hi @julienfrancaoui Please see below (I think this is the table/illustration to which you refer?). Please allow me to make two corrections to your example ... First, the confidence level for both VaR and expected shortfall (ES) is always one-tailed. So, a 99.00% CL refers to one-tail CL such...

Hi @sohinichowdhury I like your question, but I didn't quite "agree" because I have a slightly different interpretation(s), and I acknowledge there seem to be two different, valid interpretations of ARAROC, depending on whether we refer to the simpler Crouhy or the more difficult Grinold...

Hi @sajedian I frankly cannot recall where Grindold infers that "in the example effectively shrank the IC by 62%", sorry. Per the related discussion (and GARP's practice question) at...

Hi Navjyot (@navjyotbirdy) I think it's a good question. My sense is there may be an easy answer and a harder answer. The easy answer is that the market portfolio must have a beta of 1.0 by definition of CAPM's beta! We can think of generic beta as a re-scaled correlation between two assets: the...

Hi @thanhtam92 You are correct they go in opposite directions (because the "+" switches to a "-"), but I think it's the inverse of what you wrote. This exhibit replicates (and collapses) Gregory's Tables 6.3 and 6.4, as noted in the header. Assume we are the Financial Institution (FI) and our...

About this Bayes Question, more than one person has contacted me privately. I'm told the question is something like the following (I'm not sure about the exact text, but let's focus only on the numeric assumptions): If that's the question, setting aside some potential awkwardness in the...

Hi @haziqmn Because the p-value is a tail probability, it is an inverse distribution function and, as such, requires an (Excel or other) function call. It is analogous to, using the more familiar normal distribution being given the quantile (aka, deviate) of 2.33 and retrieving the probability...