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Hi @drewmanfsu Thank you for very helpful feedback. Question: what do you mean by "old garp" with respect to CVA? (because we had to explain why their first approach was wrong https://forum.bionicturtle.com/threads/garp-2017-p2-76.10344/). Just trying to understand where is the example of a good...

Agreed. Privately a member asked me to report this question as problematic, but it sounds like the question was good (and it's a classic). The wording is important but if you think about the fundamental ΔP/P = -D*Δy + 0.5*C*Δy^2, an increase in the yield is associated with a price decrease due...

@pranay1986 right, short butterfly profits on big up/down jump (also short calendar)

The HF versus MF is a classic question and historically the correct answer (going back to Jaeger) was that HFs are liberated in three ways, HF can: short-sell, leverage up, and use derivatives. This is consistent with one of Mirabile's seven differences (but Mirabile is a P2.T8 assignment)...

Thanks for the feedback @sharg and @arnasp Can I ask you: what were the Current Issues (Topic 9) questions like? (the practice exams contained no CI questions so we don't know what to expect). Also, I'd be interested to know anything specifically about the Basel questions ... thanks again

@nikic would it be more fair if each geography sat for a different test (I think people would think that would be less fair)?

HI @FlorenceCC You have it correctly. Cash settlement is the payoff, realized in cash, just like you show (see McDonald's good description below). The futures contract has a delivery price, K, which is fixed. For a long position, the payoff/settlement when closed = F(0) - K; for a short, the...

Hi @emilioalzamora1 I agree, that's why I've asked to speak with them tomorrow. We will manage a "blackout" of the forum until the end of the last exam; there is no need to manage beyond the point in time at which the last exam ends (unless I a missing something?). They sent us this: ... but I...

Last year the actual exam contained an error which our members discovered; we reported it to GARP and it was discarded from the results. Consequently, if you perceive there was a mistake on the exam, please notify me ASAP: we want to help make sure everybody gets the fairest possible exam. To...

@silver7 I apologize but the Study Note appears to have a typo (it has been a struggle to cope with all of the different CVA assignments). cc @Nicole Seaman. The Study note page 13 should read "... so the probability that the counterparty has survived must enter into the calculation as S(n)."...

Hi @cfa2015 Yes, that's correct. In this case of only two positions in the portfolio the Incremental VaR of the CAD position is $59.55 because Incremental (CAD) = Portfolio VaR(total portfolio) - Portfolio VaR (total portfolio - CAD position); i.e., Incremental (CAD) is the change in VaR due to...

@Unusualskill how do you have our slides when you aren't a paying subscriber?

@Karenly Oh, I see now ... Yes, we do have a mistake in the note. As we are following Malz, it actually should use the prior formula on page 18: L*r(a) - (L-1)*r(d); i.e., in this case where Leverage = A/E = 2.0, r(a) = 10.0% and cost of debt r(d) = 5.0%, ROE = 2.0*10.0% - (2-1)*5.0% = 15.0%...

@Karenly Yes, you are correct, but I don't see ROE = income on page 19, sorry. I see Profit/Equity per Malz Example 12.1. And equivalently ROE = ROA - [D * r(d)]. I don't see the typo but ROE is Income/Equity (either pretax or after-tax income).

Hi @willyong ooops, sorry my bad. That sheet is actually Meissner's (and should be thusly labelled more carefully). We will fix the workbook (or maybe breakout Messiner's macro-enabled sheet). But in the meantime here is the correct macro-enabled file (again, this is Meissner's creation not...

@Karenly We have the same Study Guide and LOs that you do. I definitely wish we knew more (I've asked GARP for what I call "prospective clarity"). GARP has never really written any T9.CI PQs. I did spent a lot of time on our questions that I wrote for CI: they are my best effort to give CI...

Yes, exactly: contango implies c > y such that earlier delivery would be better. And delivery gets you the cash which earns interest.

@lRRAngle It's from Hull. If the futures curve is upward sloping, per F=S*exp[(r + λ - y)*T] = S*exp[(c - y)*T] where c is cost of carry and y is convenience, then c > y, and it must cost more to carry (own) than it benefits. If you own it, and its cost exceed the benefits, you want to get rid...

Hi @Karim_B Right, I think I totally understand. Thank you for copying it wholesale. (We already identified GARP's previous error and the fixed the more basic flaw, but they didn't quite listen to me on how to best improve the question .... here is my original feedback complete with...

under a simple assumption where the yield is i.i.d. (such that yield volatility scales with the square root of time), mathematically it peaks at exactly one-third (1/3rd) its tenor (life); the local maximum is the solution to a differentiation. It goes up (amortizes) due to the rate uncertainty...