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try this link:http://forum.bionicturtle.com/threads/frm-fun-question-20-option-value-with-infinite-term.6160/#post-19506 thanks

Hi there, yes absolute VaR cannot be fitted as Var = Var * sqrt . relative VaR (1day)= Portfolio value * (volatility * normal deviate) where volatility is one day volatility of portfolio. so to calculate T day volatility have scale volatility by sqrt of T and get it as sqrt(T)*one day volatility...

VaR(N day)=-drift+VaR(1day)*sqrt(Nday) is relative var as pointed by david: if and when you happen to see the VaR itself scaled with only one VaR term, this must implicitly be a RELATIVE VaR (i.e, without drift or assuming drift = 0) so drift =0 implies VaR(N...

Hi there , under Basel requirements the banks need to set minimum of 8% if their capital in reserve for facing losses. Its a regulation set up by the Basel committee and is not like setting up some benchmark based on some intense data analysis. Basel committee requires under its sets of...

Hi there, In a CMO structure the principal is retired sequentially first of the senior tranche and finally of the equity tranche. Equity tranche receives payment after all the senior and subordinated tranches have received their dues. Only in the end did the equity tranche receives their dues...

Hi, CFA is more oriented towards investments and portfolio management whereas FRM is useful in the risk management practice like credit risk etc. If you want to have complete understanding of finance you need to understand both return and risk associated with it. It will be beneficial if you...

Hi, I agree with David. My thought process was like that the slope at the cutoff yield the slope instantly changes to zero and the slope becomes zero but if the slope changes slowly and tends towards zero than for low yields than there is bound to be negative convexity. And this slope finally...

hi there, The callable bond yes is in fact a combination of a straight bond and a short call option. Call option in the sense that if the bond price rises above a certain callable price(exercise price) than the bond is called back by the borrower and whatever bond gains in form of price...

visit the link: http://www.garp.org/frm/exam-overview/testing-policies-and-procedures.aspx#Exam Deferral thanks

hi, for rates above the coupon rate: the combination long position in a straight bond + a long position in a callable bond is positive convexity for rates below the coupon rate: the combination long position in a straight bond + a long position in a callable bond is positive convexity+ negative...

hi, 3prob.+0(1-prob.)= p*e^(.04*.25)..1 U=13/10=1.3 D=7/10=.7 prob.=e^(.04*.25)-.7/.6=1.010-.7/.6=.516 from 1, p=3prob.*e^(-.04*.25)=3*.516*e^(-.04*.25)=1.532~1.53 to be precise. thanks

@privatepilot also for more clarification try this link: http://forum.bionicturtle.com/threads/basket-cds.6490/ thanks

Hi there, in a basket of bonds the correlation determines the default behavior of senior bond. That is a higher correlation means that when there is a default by junior bond than there is a high chance of default by the senior bond as well due to high correlation of the bonds in the debt...

go to the link: http://forum.bionicturtle.com/threads/frm-fun-11-do-we-really-need-all-three-durations-lets-settle-this-now.6012/#post-18668 thanks

please visit: http://forum.bionicturtle.com/threads/i-dont-know-how-to-start-help.6743/ thanks

please visit link: http://forum.bionicturtle.com/threads/formulas-and-equations.6709/

hi there, its better that you concentrate on L1 only. Giving both levels at one go should be cumbersome and not feasible and also to develop your level of understanding better its enough to go with one level at a time. Yes BT notes are enough. David provides i think the list of formulaes...

40*.8187*.8187=26.81 u made mistake here only be careful from next time and be careful before posting Value of put option t2= (38-26.81)=11.19 value=pd*pd*value of put at t2*EXP(-0.03*2) 0.4743*0.4743*11.19*EXP(-0.03*2)=2.37 thnks

please visit: http://www.cfainstitute.org/programs/cfaprogram/register/Pages/index.aspx thanks

Hi Yes if the margin falls below maintenance margin than investor receives a margin call whereby he has to restore the initial margin to the initial margin level required. So if margin required is say 40 and due to heavy losses the margin falls to 20 which is below the maintenance margin of say...