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Hi @liyi1989 You are correct, it has been previously identified as a mistake: please see https://forum.bionicturtle.com/threads/problems-in-garps-2020-frm-material.23011/post-81380

Hi @Hesham_87 To me, that formula is merely the covered interest rate parity (CIP; aka, interest rate parity, IRP) formula. In FRM P1.T3, we reviewed why IRP is an application of cost of carry. In this (discrete) annual notation, IRP say it should be the case that the forward price is a function...

Hi @Nishant Kumar No worries, it's not a biggie. We just try to keep the forum "nice" (eg less noise) for visitors. You are more than welcome to visit/post/query/etc. Glad I could help a litte. Thanks,

HI @Nishant Kumar (you don't need to post twice per https://forum.bionicturtle.com/threads/work-experience-required-for-frm-certification.23379/post-83042 as between Nicole/myself we read every post). I assume you mean you'll be sitting Nov 2020? You will see that, as @Nicole Seaman wrote above...

Hi @riskybiz Yes, my assumption (like @Matthew Graves 's) is "linear" or like him, I'd probably prefer to say that it's a constant assumption. It doesn't need to be that way, but for myself, if we are talking about "scaling down" from an annual PD to a monthly (or 150 out of 250 days), lacking...

Hi @Eustice_Langham Those distinctions are in the CFA (or at least they were; the original source is CFA author Don Chance). Please see below. Note there are four possible combinations; the natural state is "contango" [i.e., an observably upward sloping forward curve per F(0,T) > S(0)]...

Hi @riskybiz You can treat the default pattern as monthly which is along the lines of how mortgages/MBS are treated via conditional prepayment rate (CPR) and single month mortality (SMM). CPR is the default rate per annum such that that annualized survival = (1-CRP) = (1-SMM)^12 and therefore...

Hi @SyroneDavid Very good observation. Our summary picked it this up from the source (see below; emphasis mine). You are totally correct: option price increases with implied volatility; aka, percentage (long per-option) vega is always positive. The fact that these are interest rate options...

Sure @Eustice_Langham Those statements are correct but they do not involve the expected future spot price ("normal backwardation" is not the same as mere "backwardation," alas). Contango is simply an upward-sloping forward curve (or segment): S(0) < F(0,T) < F(0, T+Δt). Backwardation is a...

Hi @Eustice_Langham The forward price, as hinted by its extended notation that includes the zero, F(0,T), is observable today. If F(0,1) = $10.367, that's a predetermined price at which the long/short (makes a promise today to) buy/sell one year in the future. That's why I like to say "you can...

Hi @NehaKey Re difficulty, I think I answered that already above when I wrote "Actually, I perceive that GARP's practice exam questions do represent the exam's difficulty. In particular, my observation is that some of their practice questions are quite difficult (a few of them are difficult and...

Hi @Eustice_Langham Actually, I perceive that GARP's practice exam questions do represent the exam's difficulty. In particular, my observation is that some of their practice questions are quite difficult (a few of them are difficult and time-consuming). They do contain some easy and/or quick...

Hi @NEichi Yes, thank you, greetings to you, too! This has been extensively discussed in the forum. The difference is merely compound frequency. GARP's new chapter 10 happens to assume annual compound frequency, but we tend to default to continuous compound frequency (given that's Hull's...

Hi @nag_san That's a mistake (good catch!). It's also unusual to plot option value against strike price (however, please note it is typical to plot implied volatility against K or K/S). It is a true statement that regular (aka, vanilla) option value is always convex. Please see below...

Hi @RajivBoolell Thank you, I am doing fine and I hope you are well also. The example in the video includes (on the first row) a six-month bond that pays a 2.0% s.a. coupon with an observed (i.e., given as input) price of $100.40. As this first bond matures in only six months, there is only one...

Hi @Rohit I think it has low (to medium, but not certainly not high) testability. The thing about the economic balance sheet cluster: it's been consistently (i.e., every year) assigned since 2013, so it cannot be dismissed. Re type of questions, I think our associated PQ try to represent what...

Hi @clement Method #2 is more correct (can a thing be more correct; howabout I say that method #1 is less correct) because method #1 is inferring the default probability (PD) and relying on the fact that a PD approximates the spread if LGD = 100% per PD = spread/LG. Method #1 therefore contains...

Hi @lincoln40113 See below for what they are doing here. Here is the XLS that i just quickly created to match their calculation https://www.dropbox.com/s/2uhl76jyqpk3qbp/070720-garp-ex-19-2-ce.xlsx?dl=0 Let me know if it's not self-explanatory? (note to self: footnote 4 may be mistaken, says...

Hi @lincoln40113 Thanks for the question. I would recommend NOT memorizing them (to save shelf space in your brain!). If it helps, if it gives you any comfort, I do not have memorized either of those circled formulas. In regard to the correlation param, the text neglects to mention that the...

Here is the XLS for the above (second sheet) https://www.dropbox.com/s/ry3tfqd304drmsn/7.b.1 Stulz_ERM_target_pd.xlsx?dl=0