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  1. David Harper CFA FRM

    P2.T5.22.8. Value at risk (VaR) backtest power and additional approaches

    Learning objectives: Identify and describe Type I and Type II errors in the context of a backtesting process. Explain the need to consider conditional coverage in the backtesting framework. Describe the Basel rules for backtesting. Questions: 22.8.1. Bertha is analyzing the application of the...
  2. David Harper CFA FRM

    P1.T3.22.24. Stock option features and variations

    Learning objectives: Explain how dividends and stock splits can impact the terms of a stock option. Describe the application of commissions, margin requirements, and exercise procedures to exchange-traded options and explain the trading characteristics of these options. Define and describe...
  3. David Harper CFA FRM

    Mark Meldrum (aka, the GOAT) has joined us at CeriFi

    In 2021, Bionic Turtle took a big step to become part of the CeriFi family. I’m proud to report that the experience has exceeded my expectations. I believe our customers would agree that we continue to live our values: integrity great learner outcomes curiosity in pursuit of subject matter...
  4. David Harper CFA FRM

    P2.T5.22.5. Peaks-over-threshold (POT) approach to extreme value theory (EVT)

    Learning objectives: Explain the importance and challenges of extreme values in risk management. Describe extreme value theory (EVT) and its use in risk management. Describe the peaks-over-threshold (POT) approach. Questions: 22.5.1. The board has asked Claire to develop risk estimates at very...
  5. David Harper CFA FRM

    P1.T3.22.18 Short-selling and financial forward contracts

    Learning objectives: Define and describe financial assets. Define short-selling and calculate the net profit of a short sale of a dividend-paying stock. Describe the differences between forward and futures contracts and explain the relationship between forward and spot prices. Calculate the...
  6. David Harper CFA FRM

    P2.T5.22.1 Basic historical simulation value at risk (HS VaR), lognormal VaR, and expected shortfall (ES)

    Learning objectives: Estimate VaR using a historical simulation approach. Estimate VaR using a parametric approach for both normal and lognormal return distributions. Estimate the expected shortfall given profit and loss (P/L) or return data. Questions: 22.1.1. Peter has collected the daily...
  7. David Harper CFA FRM

    P2.T10.22.7. The rise of digital money

    Learning objectives: Describe and compare different attributes of means of payment. Describe the risks faced by the banking sector as e-money adoption increases and identify means of mitigating those risks. Explain reasons for and characteristics contributing to rapid global adoption of e-money...
  8. David Harper CFA FRM

    P2.T10.22.5. LIBOR transition according to FMSB

    Learning objectives: Discuss regulatory expectations on LIBOR transition and how these expectations can help market participants in their management of conduct risk arising from the transition. Analyze the risks of LIBOR transition from both sell-side and buy-side perspectives and give examples...
  9. David Harper CFA FRM

    P1.T3.21.14. Tailing the hedge

    Learning objectives: Calculate the profit and loss on a short or long hedge. Compute the optimal number of futures contracts needed to hedge an exposure and explain and calculate the “tailing the hedge” adjustment. Explain how to use stock index futures contracts to change a stock portfolio’s...
  10. David Harper CFA FRM

    P1.T3.21.12. Futures markets

    Learning objectives: Define and describe the key features and specifications of a futures contract, including the underlying asset, the contract price and size, trading volume, open interest, delivery, and limits. Explain the convergence of futures and spot prices ... Describe the application of...
  11. David Harper CFA FRM

    P2.T10.21.2. Artificial intelligence risk and governance

    Learning objectives: Identify and discuss the categories of potential risks associated with the use of AI by financial firms and describe the risks that are considered under each category. Describe the four core components of AI governance and recommended practices related to each. Explain how...
  12. David Harper CFA FRM

    Introduction to the Quantitative Foundation of Risk

    A common question asked by FRM candidates (and people who are considering whether to sit for the FRM exam) is, where can I find an introduction to the math? Although the FRM has many qualitative and conceptual topics, it also contains a lot of formulas and numerical illustrations. The CFA, by...
  13. David Harper CFA FRM

    WIFE Week in Financial Education (2021-06-27)

    Welcome to the latest WIFE. For Part 1, we wrote a new set of insurance company practice questions (PQs). I was recently asked how much insurance is assigned in the FRM. Surprisingly little. You might expect insurance to be prevalent in Operational Risk (P2.T7) but it makes but three appearances...
  14. David Harper CFA FRM

    WIFE Week in Financial Education (2021-06-20)

    Welcome to the latest WIFE. For Part 1, we have a new practice question (PQ) set for the insurance chapter (FMP-2). I have a question about the combined ratio after dividends (CRAD). This CRAD measure is interesting because some sources subtract the dividend, CRAD = CR - D, while others (like...
  15. David Harper CFA FRM

    WIFE Week in Financial Education (2021-06-14)

    Welcome to another WIFE. Last week we added a new practice question (PQ) set for the Insurance chapter (P1.FMP-2) and a new PQ set for the Risk Monitoring chapter (P2.IM-7). Trying to be realistic, for the mortality table, I pulled actual projected 2021 period life tables from the Social...
  16. David Harper CFA FRM

    WIFE Week in Financial Education (2021-06-07)

    Welcome to another WIFE. We started a new series of practice questions (PQ) for Financial Markets and Products (P1.T3). Question 21.2.1 (Investment banks) reflects my style of packing three concepts (any one of which might be tested) into one question by using the Dutch auction's answer to...
  17. David Harper CFA FRM

    P1.T3.21.2. Investment banks

    Learning outcomes: Describe investment banking financing arrangements including private placement, public offering, best efforts, firm commitment, and Dutch auction approaches. Describe the potential conflicts of interest among commercial banking, securities services, and investment banking...
  18. David Harper CFA FRM

    WIFE Week in Financial Education (2021-05-24)

    In our latest Week in Financial Education (WIFE), Richie's new video helpfully reviews a series of duration questions, including modified, Macaulay, money duration and price value of basis point (PVBP; aka, PV01). Compared to the FRM, the CFA's approach to duration differs only slightly. The...
  19. David Harper CFA FRM

    WIFE Week in Financial Education (2021-05-17)

    Welcome to another Week in Financial Education! This week saw some great questions and fascinating insights. I will just highlight the instructive example of a flawed solution in the 2021 practice paper (as usual, the impetus is candidates' justifiable confusion). This one is tricky because the...
  20. David Harper CFA FRM

    WIFE Week in Financial Education (2021-05-10)

    Welcome to the latest week in financial education (WIFE)! As the May exams have started, we experienced another busy week. We are grateful for some fabulous contributions by members (see links below). At this time of year, many candidates are naturally focused on practice question revision, not...
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