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@jortiz12 I think you are asking in context of component VARs and PF VARs. first you need to know whats the PF volatility. your PF has long Tnote and short Bund. if you get that volatility, then you simply multiply by 1.645*sqrt(1/250) to get the daily VAR. check Dowd Ch 3. There are many ways...

@AUola2165 , KRD are estimations, fixated on certain yield curve points. DV01 is a type of duration (discusses change per 1 basis point move in the rate), durations come in many shades: Effective, modified, DV01, PBV, etc. KR01 that you are referring to is key rate duration in context of 1bps...

Offsetting Greeks, while it can help balance risk in a portfolio, doesn't by itself determine whether a portfolio is long or short correlation. It's the correlation between the underlying assets that matters in this context.

Type 2 error chart: On the Right you have a distribution chart with a mean at zero, and it has a 5% significance level marked on it. This means that only 5% of the data falls to the left of the threshold for statistical significance. Now, in the second diagram (left), you have another...

Total return swap implies you swap the exposures 100%. thats a package including all the associated risks, be it market, credit, liquidity whichever is associated with the security. other hedging tools might mitigate market risk (futures) or just credit risk (CDS) but TRS is the total thing.

Ex-post, answer for tracking error should be array should be: R(P-B)1, R(P-B)2, R(P-B)3......R(P-B)N , we take Stdev of that (see blue number below). however for ex-ante, this does not consider the variances and covariance and is not the correct formula for tracking error. the calc in screen...

@FPare4571 please allow me to answer: The X percentile used for capital calculation can be based on the Normal distribution or the LogNormal distribution. It depends on the context and the underlying assumption about the distribution of data. Percentiles in both distributions represent the value...

Lets simplify: equity means call option on value of Assets. if you subtract the call from asset that implies you did Asset - Equity that leaves you with debt. now which type of debt comes first. senior debt. for senior debt value you need to deduct from firm value, two things.. call on assets...

you are correct, so let me clarify further: Blackscholes>>normal distribution>>volatility is constant. green line. if you solved for volatility based on option prices available that will show the smile/skew/frawn etc. key is, implied volatility is flatlined (thanks to blackscholes) any different...

Credit enhancement can take various forms, such as over-collateralisation, excess spread, subordination, and guarantees. In this case, the credit enhancement for the senior tranche is $70 million due to subordination. Mezzanine and equity tranches absorb losses before affecting the senior...

Hi, I can help you with your question. if I can get more context, it will be useful. in anycase, rule of thumb is to keep consistency with rates, if risk free is continuously compounded then you'll have to use a continuous compounded rate to find the spread. i hope I got your question right...

I think its due to the package you have. did you opt for spreadsheets along with videos? not then you may consider an upgrade?

Few things to note here: In options trading, there are a few important terms to understand: Naked Call: You write a call option for a stock with a strike price of $10, but you don't actually own the stock. If the stock price rises to $100, you would need to buy the stock at the market price...

The big one here is Operational risk: lack of controls. Its like a disease and the rest others are symptoms of it. very typical of bank failures, nothing new i mean. If i were the regulator, i would have strictly checked management's behaviour and psyche. usually its an ego of few at the top

Please allow me to answer: 4.6299 comes after a daunting calculation: https://www.investopedia.com/terms/m/macaulayduration.asp Macaulay Duration = (C1 * t1 + C2 * t2 + ... + Cn * tn) / P Taking sum of finite series, we get (Sum((ti*Ci)/(1+y)^t+n*M/(1+y)^n)/(Current Bond price) The Cs are...

From excel: NORM.S.INV(0.999)=3.09,. or you can look up the z-table and see what sits at 0.999 probability, that should be 3.09. It's the area under the standard normal distribution curve to the left of 3.09 is 0.999 or 99.9%.

@yLam4028 the book says if F is high the economy is doing well (aka low PD) then U will tend to be high (pushed way far into the tail corners). See page 75-77 of the GARP book. Re: cupolas, it is where you have 2 distributions, you model their correlation, instead of getting tangled in a huge...

@jlapienis buying assets (aka quantitative easing) from open markets. it increases money supply. Printing also increase money supply, can cause inflation and result in devaluation of currency (too much paper chasing too few goods). Also when we talk of money supply, we cant ignore M1 (narrow...

@Shau_2207 please allow me to answer: P(1,1) = from next two branches (Up & down) Expected value is being discounted by the rate prevalent at the node This is better understood if we use a binomial tree diagram. See page 22, Reading 5 in BT notes. For exam you may be given info such as: The...

@enjofaes Book says ENE = expected negative exposure, notes say NEE (Negative expected exposure) , interestingly Wiley also uses NEE. See page 252 of the book you will see it says "sometimes known as negative expected exposure (NEE) NEE (Negative Expected Exposure) & EE (Expected exposure)...