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@David Harper CFA FRM You are the best. Thanks for such a detailed clarification.

@David Harper CFA FRM Can you please help me understand common types of structured products. I could not find the difference between 3 categories mentioned in notes. Generic class of asset-backed securities (ABS): This I understood. Various loans are pooled together to form CDOs...

@David Harper CFA FRM Hi David, I think the formula for default correlation given in notes is incorrect. "Malz, Chapter 8 (Sections 8.1, 8.2, 8.3 only): Portfolio Credit Risk"

@David Harper CFA FRM Chapter "Credit risk and credit derivatives" Please check the blue color text. It's contradicting. As in, is credit spread increasing or decreasing for low rated debt as time to maturity increases.

@David Harper CFA FRM please help me understand ( Red color text) There are at least two conditions for an asset price to have a lognormal distribution o Constant volatility of the asset o Smooth price change without jumps (i.e., a diffusion process)  But neither is satisfied for an exchange...

@David Harper CFA FRM Hi David, In the screenshot below, capture from your notes from "The Evolution of Short Rates and the Shape of the Term Structure", while calculating discount rate of 0.766371 you have discounted year 2 rates of 18.4 and 10.2 with 10% should it be 14.2% instead of 10% as...

Hi @David Harper CFA FRM , I understood about rebalancing but still don't understand about negative risk premium about volatility. I mean if I am selling out-of-money put option and if the volatility is more than strike rate then I got to keep the premium and if volatility goes below strike...

@David Harper CFA FRM Please help me understand this concept. Rebalancing as a portfolio strategy is also a short volatility strategy which produces a long run volatility risk premium. Investors who do not rebalance (those who own 100% of the market) are long volatility risk and lose the...

@David Harper CFA FRM Formulae wise i understood how trader is heding i.e buying some face value of nominal bond against some value of TIPS. But theoretically how this hedge works is what i want to understand. This is how i think. Trader is shorting Nominal bond and buying TIPS. Suppose that...

@David Harper CFA FRM In our study notes, under the topic "Explain the drawbacks to using a DV01-neutral hedge for a bond position." It's written, "Neutralizing DV01 ensures that the trade neither makes nor loses money only if the yield on the TIPS and the nominal bond both increase or...

Hi @David Harper CFA FRM In official GARP reading there is a concept discussed. How can one buy a correlation. In this, it's been said that one can buy a call option on the index and simultaneously sell call on individual stocks. This will benefit in correlation increases => stock market will...

@David Harper CFA FRM In Backtesting VAR chapter, one idea is shared wherein its been told that we can't use actual returns for VAR backtesting as they are volatile so we either use hypothetical returns or cleaned returns. Can you give one example as to how we get hypothetical returns from...

Which of the following is not consistent with the conditions for Wold’s theorem? A. Rational distributed lags are used to approximate the Wold’s theorem B. Covariance stationary is a prerequisite for Wold’s theorem C. Wold’s theorem uses infinite distributed lags D. The error term in the...

@David Harper CFA FRM Do we have to remember the formulas, given in the notes as well, for exotic options for the exam?

Thanks, Nicole and David $15 Amazon gift card would be great. Jaskarn Singh

@David Harper CFA FRM What do we exactly mean by invertible i.e. Theta<1 in MA(q) process?

@David Harper CFA FRM Pass rates of May exam are ALWAYS lower than November. Do you think we need to do something extra for May exam? This makes me feel nervous....

I remember one more question. Not shared above.... Something about bond price and yield and it was told that yield curve shifted upwards and we reach a new price. This new price due to two shifts? Options were given... I marked Decrease due to convexity and increase due to ( something I don't...

Updated by Nicole to note that the reading in reference is Reading 18, John Hull, Chapter 4 (please make sure to note which reading you are referencing, as there are many readings in Topic 3 of the curriculum) Consider an example where a fund of hedge funds divides its money equally between 10...

It's mentioned in our notes and I quote. " Every insurance company operating in the state contributes an amount to the state guaranty fund depending on the premium income it collects. When a particular insurance company becomes insolvent, this fund is then used to pay the small policyholders of...