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  1. R

    Ch2 Trade-off: CF vs Accounting

    Hi all, In Ch2 notes p. 4 it states "There is a classic trade-off between economics (aka, cash flow) and accounting: to reduce cash flow volatility might increase earnings (accounting volatility)!" I am a bit puzzled on the trade-off between CF volatility and accounting volatility. I am...
  2. R

    CLN & Risk Transfer

    Hi all, 1. Do Asset-Backed CLN transfer interest rate risk (market risk) as well as credit risk since investors are exposed to capital gain/loss on the credit portfolio? 2. Also would it be fair to say that the investor (credit risk buyer) is exposed to the capital gain/loss on the underlying...
  3. R

    Credit Risk & Replacement Value

    In the chapter 1 notes p. 12 it states "An asset has credit risk when it is in a position with positive replacement value." Could anybody explain the relationship between credit risk and positive replacement value. My thinking is that an equity share would have positive replacement value, but...
  4. R

    Chapter 4: Multivariate Variables (p. 16)

    I was wondering whether the weight I highlighted in red should be (1-w)^2 instead of w^2. Would appreciate an explanation!
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