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finished part II test and now can have a break

To reciprocate to this forum, I put down something I still remember... some of them might not be correctly recalled though... 1. We expect to see the lowest correlation among the returns of which type of hedge fund strategy (exogeneity in strategies): A. equity market neutral; B. short bias...

Hi Nicole, It was a crazy day for me. I spent half a year to repare, and went through almost all the required reading materials. Still there were some questions I cann't figure out a way to tackle (perhaps 10%-15%). In most other cases, I have to guess among two or three alternatives. Out of...

Hi Pflik, Regarding Chapter 11 of Jorion's book, I got a reading note. It may help with respect to your question "how the correlation matrix figures into the calculation".

Hi david, I think you made a calculation mistake there: 4%^2=0.16%, not 1.6% Since VaR(92.16%)=0, VaR(99.84%)=-100, I think VaR(95%) has to be -$100, meaning we're confident that the chance of loss staying under -100 is at least 95%. Correct me if I'm wrong.

The argument seems to be based on the concept that a call option's value (intrinsic value+time value) is always greater than its intrinsic value (St-X). In other words, since c>=St-X at anytime t before expiration, excercising the option early to lock in the intrisinc value is less attractive...

I think we should figure out the probability of upward-move and downward-move first (risk neutral probabability) of the binomial tree, then we can discount the expected payoff (based on that probabability) using the risk-free rate and derive the option price.

Hi David, I'm confused by two points in Hull's charpter 6. 1.Why we calibrate the hedge ratio based on duration of the underlying asset of the futures, instead of the futures themselves? In some cases, e.g. Eurodollar futures do not have explicity underlying asset, though we know the...

For 301.2, my qustion is that why convexity effect is defined as the gap between the estimated two-year spot rate with represence of volatility, and expected one-year spot rate with no volatility around expectation? Any intuition here? For 301.1 I think risk premium shall only be applied to...

Anyone can help me with Q.202.1? By my understanding, in binomial tree setup, given p* and u, the real-world annum expected return miu=-0.0221; sigma=0.3646. Since binomial tree follows that ln(St)~norm(ln(S0)+(miu-signma^2/2)*dt, sigma*sqrt(dt)) then the 99% percentile of ln(St) is...

both comments are brilliant and insightful. While I've no experience with CFA I tend to trust Wojtek's feeling. But I also agree with Shakti in what we expect to take away from FRM preparation...

Anyone can give me some clue for question 405.2? I think A and C are true. For B, I think maybe ES is not so appealing to regulator since it can't be backtested. But what about D? I've no idea for it.

I use formula for calculating the volatility of the p&l of the hedged portfolio as follows: S.D.(hedged portfolio)=S.D.(error term of interest change regression)*DV01 of target position*Dollar amount of target position

enjoy the process of learning...

regarding question 29.2, to be able to scale 1-daiy VaR to 10-day VaR by the 'square-root of time' rule, all we need is the reurns are independently and identically distributed (iid), but not necessarily normal distributed, am I right?

Is it necessary to add one more condition "the severity of one event is independent of the severity of other event" question 31.1 ?

I think question 318.2 is confusing 1. the zero coupon bond has only one future cashflow, indicating it should be exposed to 30-year rate shiftonly. But why in your question your have non-zero key rates duration for year 2,5,10 2. why the key rate duration for year 2,5,10 is negative? I thought...

thanks. my text book seems so confusing that your 'non-technicial' note really helps

Can anyone shed lights on why normal distribution only has the 1st and 2nd moments, while no other higher order moments (such as skewness and kurtosis)?

I realized our formula are essentially the same: mine: variance (n)=(1-persistence^10)*0.0004+(persistence^10)*(0.04639^2)=0.00175 yours: variance(n)=0.0004+persistence^10*(0.04639^2-0.0004) But admitted yours is easier to memorize. Thanks a lot for your time!