Hi all, @David Harper CFA FRM , @Nicole Seaman
First of all thanks to David, Nicole and everyone contributing on this forum. I passed FRM level 2 in November after having purchased BT and Schweser material.
You will find below my feedback on the FRM program, the exam and BT.
R67-P2-T7-Hull, p18 (Study Notes)
Technically we shouldn't take the average of the gross income since only positive gross income are taken into account. If the gross income is negative in year 1 for example, we will only average the two other years.
Reference: Hull (Risk Management and...
Hi @PJAYAKUMAR ,
Hull has the following formula to compute the credit equivalent amount taking bilateral netting into account:
I don't know how the 0.4 and 0.6 coefficients were derived but that's the formula.
In the question, NRR=0.5 so
credit equivalent amount =...
Hi @David Harper CFA FRM ,
Despite all the good explanation I am still confused about the definitions of the different biases. Those definitions don't seem mutually exclusive to me. As you mentioned survivorship bias might be a sub-class of selection bias, but it is not presented as such in the...
Thanks for your quick reply.
Agreed the bond yield is an increasing function of funding cost, but that does not explain why the asset swap spread is an increasing function of funding cost. How can we prove that when the funding cost increases by dx, bond yield increases by more than...
I am still struggling with the explanation provided. Would it be possible to zoom on the following assertion?
"As the cost of funding the bond increases, per B = D - S, a higher S implies a lower B. "
Since S = Asset Swap Spread = Yield of the bond - funding cost,
if funding cost...