Search results

Hi david, Could you please help with this one on Volatility Smirk. Equity options tend to exhibit volatility smirk where low strike price options have a higher implied volatility than high strike price options. An explanation that has not been used for the smirk pattern is a)...

Hi David, Can you please brief on the below. The answer is A but I am not convinced somehow with II & III. Which of the following statements about economic capital is (are) TRUE? I.The economic capital system provides an appropriate level of capital to meet any potential disaster. II.The...

Hi David, I am sorry to post so many of them.. how to go about this How to go about this Suppose the daily returns of a portfolio and a benchmark portfolio it is replicating as follows: Portfolio Return(bps) Benchmark Portfolio Return(bps) Day 1 34...

Hi David, Is there any fundamental behind this question or just answer by your own obsevation. With respect to the role of hedge funds and market efficiency: a.theoretically they should increase efficiency, but there is no evidence that they do increase efficiency. b.theoretically...

Hi David, The Question is from GARP 2008 Practice paper. Still am not very much clear about the convergence by short lookback. May the answer is just wrong in practice paper. Thanks for your immediate respond. Could you also throw intution on the below. Which of the following...

Hi David, Thanks for the concrete example & answer. The answer is B. Right I also posted a question regarding Limitation or Improvement area for LDA. Could you plz jot your views. On this is another one on LDA, according to me the answer is A, becoz lossed are not Inflation adjusted &...

Hi david, Could you plz explain what a Lookback straddle has to do with fixed income convergence. I cannot link the two. Need your help asap. The payoff of some hedge fund strategies is commonly identified with the payoff of option strategies. The payoff of a long look-back straddle...

Hi David, The answer for the below is B, could you plz throw some light on the explanation. What is the main reason that DB used a piece-wise severity distribution instead of a single parameteric distribution to model losses within BL-ET cells? (A) Insufficient Cells (B) Difference...

Hi David, Could you point out what are the major limitation of LDA. I can understand the major limitation would >> Estimating the dependencies between cells. Could you also briefly explain which copula function they use. Generating Tail Losses How it can be improved to capture the...

Hi David, Thanks David for sharing such deep understanding with us. Just to add what you said about four parameter, there is another one called Correlation, which would always be given by Basel ( which fits into your Complex Function of ASRF). Regards, Rahul

Hi david, Thanks for you feedback, to take your first point. I would like to put it in VaR termenology, the purpose here is VaR calculation, and you might need to take accurate volatility estimation to abide by strict Risk Controlling. So taking EWMA is the only option from which you will...

Hi David, As far as I understand, lets take an example of 2 IT stocks A & B. The volatility of A & B are moderately different & have same (+ or -) correlation to market. Suppose that firm A is Acquirer & B is Target, what we would probablt see in merger arbitrage is the stock prices of...

Hi Sidh, Would redirect to the below post.......... Awesome Post http://www.acredittrader.com/?p=24 Regards, Rahul

Hi David/FOQ Even I am not getting this correct, below are my calculation. Would need your help. I think FOQ is missing out on the Notional to be added at the last node. I tried adding notional but still away from the Answer. Fixed Disc Fac USD Floating...

Hi Daniel, I am just trying to make a point here. "In order to calculate the premium from the buyer, we discount the survival probabilities*spread. This is because the buyer has to pay for their survival in order to receive the seller’s protection". In your above statement, the buyer...

Hi, The add-on factor is 10%. this gives a credit exposure of $15 +$50* 10% = $20 M, and credit risk charge of $20 * 8% =$1.6M Hope it helps, I cannot explain the formula, becoz its been recommended by Basel. Regrads, Rahul

Hi David, Does Jorion hand-book contains all 140 Questions from the 2007 FRM exam. Can I get a complete Q paper for 2007. Is there anyway to get the original paper. Do scheweser have it. I checked GARP liabrary, but i cudn't found it there. Regards, Rahul

Hi David/Ajsa, Thanks for the excellent explanation. Take it as below Example A CLN buyer is buying exposure of SPV in the Example thru issued Notes, So the payoff will be below CLN Buyer Payoff - % of Regular Coupon (5%) + (Short) CDS Spread (200bps) + % Yields from Collateral (Invested...

Hi David, Would appreciate for your help in understanding the below, should we count them in Quant section - Any particular reason for such wierd Question in Handbook. Assume that the DV01 of an interest rate swap is proportional to its time to maturity (which at the initiation is equal to...

Hi David, Need your help on the below, the answer for this is C. But not convinced though, why the negative correlation between assets will be increased risk for an investor. Question: You are considering an investment in the mezzanine tranche of a tranched basket default swap (TBDS)...