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I as per my understanding goes and after some referrel from the net, The Spot rate movements increases counterparty risk beacuse in a currency swap the NP are exchanges, if european Bank receives xm $ from A in US and pays libor on it and receives y m Euros from B in europe and finally Bank...

Hi if i can help, The cross currency basis swap is just another kind of currency swap with floating/floating interest rate on both sides. E.g. A(US resident) exchange 13m $ with B(europe resident) of 10m euros and A pays Euribor-basis spread on 10 m euros and B pays A Libor on13m $. B wants to...

We can approximate the given binomial distribution with the normal with the following procedure: the standard deviation of a binomial with p = 25% and n =100 is SQRT[25%*75%*100] = 4.33 the standardized interval [80,100] when mean is 25 is [(80-25)/4.33, (100-25)/4.33] = [12.70,+17.32] from...

Hi when we include mean P/l its the net gain or loss the portfolio has earns while calculating the absolute Var we take it as negative so as to reduce the overall Var that is the largest loss that can occur over a given time frame at a certain confidence level. So if the portfolio expected mean...

hi proceed as Std(Y) ^2=(b*Std(X))^2+Std(e)^2 [see how it comes below******] =>(b*Std(X))^2=Std(Y) ^2-Std(e)^2=.26^2-.1^2=.0676-.01=.0576 =>(b*Std(X))^2=.0576 =>b*Std(X)=.24=>Std(X)=.24/b=.24/1.2=.20 we know b=Cov(X,Y)/std(X)^2 b is the beta [@@@ below derivation]...

Hi there, In the 1-v is used to calcultae only one variable stats what you were doing was u were running stats for values of 2 variables X and Y. please try again anf enter the values of only one variable either X or Y and do not enter other variable values be careful. clear Work-> 2nd x01 = 0...

HI the institute published some important information regarding exam surveying candidates who sat for 2013 exam. Here is the survey report which can prove helpful for anyone aspirin to give the exam in the future. http://cfainstitute.org/Survey/candidate_survey_2013.pdf thanks

hi (its shakti not shanker) Yeah you are right we calculate the std deviation of returns on the present Tth day and the historical return on t'th day (t<T),volatility on this day is the old volatility is taken ,now we adjust the historical return at time t as rt adj=rt*(volTth day/vol t'th day)...

Hi whats the problem i do getting correct answers. First clear TVM and work. Enter the values in 2nd+Data serial wise correctely. Now press 2nd+ Stat and press up key sequentially and see all the values coming correctely. i think you made mistake somewhere. do it 2-3 times. thanks

Hi, i can give you some rough idea Consider a 2 bond portfolio where the bonds 1 and 2 are their Bond 1 and 2 PDs are 2% and their expected losses are x1 and x2 in case of default. if both default then PD of both is .02*.02=.04% if any one defualt probability is .98*.02*2=3.92% and if neither...

Hi there could i help, According to my understanding the area under any distribution represents a cumulative probability. In this uniform distribution the probability that loss excess 95th percentile is larger as is evident from the graph as compared to normal distribution whose area(probability...

Hi Liquidity is preferable while doing back-testing. use the formula for Liquidity Adjusted Var while doing back-testing the Var will always increase due to liquidity as we are unsure of the future risk if liquidating higher the liquidity better chance to liquidate positions but illiquidity...

Hello there, Yeah DV01 is used to assess the price impact by giving a shock of 1 bps to the entire yield curve which is assumed flat. so the shift is in parallel direction at all points of yield curve by 1 bps. But in case of Partial'01 there is some non parallel shift in the adjoining area of...

Hi, We price the bond first according to the yield curve spot rates for different maturities. According to my understanding on a yield curve we choose a certain spot(fitted) rate and change the spot rate by 1 bps an see the effect of change in spot rate on the bond price keeping all the other...

you can also use continuous compounding to derive our second formula which can come very handy during the exam, suppose we have 1$ at time 0 we invest it for period t1 at rate r1 and at f for period t2-t1 thus our overall return should be same as the return on $1 invested at r2 for period t2...

Hi second one is approximation to the first one to make the calculations a little simpler. Let f be the forward rate and r2 be rate for period T1 and r1 be rate for period t1 then foraward rate is the rate for period starting after time t1 till time t2 where t2>t1 for a total time of t2-t1...

Term structure of interest rates is the path the interest rate can take over a period of time i.e. level of interest rate over different periods in future. The interest rate is the expected interest rate. if there is 1 yr exp. interest rate i, we know from price of 2 yr bond the 2nd yr interest...

refer to the link:http://forum.bionicturtle.com/threads/p-strips-c-strips.208/ David has explained that arbitrage is one of the reasons for reconstitution of the strips. As the need arises i think that the bank wants to reconstitute, lack of investors demand for strips or that cost of stripping...

1. The treasury strips are innovative financial instruments they are created through financial engineering from Treasury bonds/bills, this is the practice of many investment banks who wants to offer their customers with many sources of investments. The treasury just issues the bonds and bills...

Additional links for books for your exam preparation towards cfa: 1. amazon 2. http://www.cfapubs.org/loi/inv 3. http://as.wiley.com/WileyCDA/Section/id-397830.html 4. http://www.goodreads.com/shelf/show/cfa