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Yes, absolutely true. My typo. Thank you @tattoo !

Hi @isagasta It applies the covariance property that COV(aX + bY, cW + dV) = ac*COV(X,W) + ad*COV(X,V) + bc*COV(Y,W) + bd*COV(Y,V). More specifically, please see https://forum.bionicturtle.com/threads/question-on-cml-and-market-portfolio.1278/post-4678 i.e., as emphasized below

Hi @Merlinius The LO verb is "assess" such that your inference is correct: probably a calculation (of the rank correlation metrics) will not be required on the exam. You know how we roll here: we are sincere about understanding the concepts. Can somebody who has not actually calculated...

@danghara yep, thanks, I wrote it wrong while talking over my ink, but fortunately the formula bar and calculation are correct

Hi @Sixcarbs Actually, it currently looks correct to me: Given Jensen's E(Rp) - rf = α + β(p,m)* E(Rm - rf), And assuming ρ(p,m) = 1.0 in a well-diversified portfolio s.t. β(p,m) = σ(p)/σ(m): E(Rp) - rf = α + [σ(p)/σ(m)]*E(Rm - rf). Now divide by σ(p): [E(Rp) - rf]/σ(p) = α/σ(p) +...

Hi @akrushn2 I actually think the setup is slightly confusing in a way that could lend to your interpretation, but the gross exposure is $2.0 million = $1.0 mm long plus $1.0 mm short; $100,00 each over 20 positions. The firm-specific returns are uncorrelated but there are 20 of them; notice how...

@zamz00 One solution to component VaR is Individual VaR * ρ(i, Portfolio); since correlation cannot exceed 1.0, the upper limit on component VaR should be individual VaR. Some discussion here https://forum.bionicturtle.com/threads/component-versus-incremental-value-at-risk-var-level-2.4961/...

@oryan5000 actually, I'm not sure we FINISH before the Nov exam: the schedule isn't finalized (we have to see the 2020 drafts also). The major determinant is the state of the 2020 syllabus as its degree of churn will be the major factor in our planning. We definitely will have made solid...

Hi @oryan5000 We really are going to start to update them before the November exam (I promised Nicole)

@zamz00 same as above which is merely the 2-asset instance of an n-asset portfolio. Portfolio variance given by matrix multiplication x(T)*Σ *x where x is column vector of (in this case) PV of Flows, Σ is covariance matrix (given by the matrix product σ*ρ*σ), and x(T) is transposed vector.

Hi @amegupte The discount factor is the present value of $1.00 future dollar. If the rate is discrete, the df(T) = 1/(1+r/k)^(-k*T) = (1+r/k)^(-k*T) where k is the compound frequency; e.g., if T = 3 years, k = 1 period per year; annual compound frequency; r = 4.0%, then df(3.0) =...

@Harshit Chawla sure thing, it's the sort of bad question that ends up being instructive! btw, I just realized that I glossed right past the fact that we have here a small sample without any knowledge of the distribution: we are not actually justified in using the student's t! CLT would justify...

Hi @Kjetil It refers the former (i.e., "total loss during a 10 days period") not the latter (not "happening during one day"). In the expression "10-day VaR on a 99.0% confidence level," the 10 days is the time horizon. If the 1-day C% VaR is $1.0 million, then assuming i.i.d. we might scale this...

Hi @Harshit Chawla Maybe we should parse the math from the language, because it's Miller's question (I would not write a question like this, I do presume you understand this is Miller's question) and the language is imprecise (and I probably over-explained it above :rolleyes:). The math is...

Hi @ps_ricky_son Sure thing. Your question was good so I mentioned in on LinkedIn and I think my second pass might even be sharper with respect to the analogy to implied volatility; in doing so, I realized that both invert to solve for a risk factor (i.e., spread or volatility) as a function of...

H @Harshit Chawla It is true that the test statistic is given by (X - µ)/SE = (45 - 40)/[29.3/sqrt(10)] = 0.54 and that, if we want to consider the +0.54 quantile on the student's t distribution (with 9 df), then 70% of the area is to the left (i.e., your point that "70% should be the...

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Hi @Sixcarbs We don't offer the PQs a la carte, rather they are a key component of our Basic package; i.e., our lowest-price package is the only way to buy our practice questions. See here because we recently received this question again...

Hi @ps_ricky_son The 10 basis points does not have an analytical (i.e., convenient formula-based) solution, in a way similar to how internal rate of return (IRR) or implied volatility are found via iteration: we need to iterate an input (aka, trial and error) until the output matches the number...

Okay @Bukhalid I wish you would have used our affiliate link