"You are your own third party and what do you do? your CVA becomes worthless as the counterparty comes more and more to default."--- CVA will decrease in magnitude or become worthless ? interesting thread.
IMHO focus of question was drawback of SMA approach. In SMA approach risk exposure is one the factors. This might encourage Banks to take risky exposures(high risk high reward) which means Banks might go unpunished for more risk exposures. Did anyone remember the options for the answers on this...
Big price move on either side ( price of the stock either increase by X% or decrease by Y% ) would effect the TAIL more -- hence will pull up the implied Volas for the tails. So writers would expect a higher premium on the OTM Calls/Puts -- Smile curve IMHO would capture that move.
How relevant are these topis for level 1? Is it testable? if yes what should we focus on. I am asking because in the practice question these appear to be part of level 2. Thanks.
Also the wiki link(http://en.wikipedia.org/wiki/Pricing_point) confirms that WHERE (Delivery point) is part of the contract.
"In a futures contract where the underlying is a physical object, such as grain or oil, the price of the futures contract is quoted assuming delivery of that physical...
Also there was one question to find updated correlation coefficient You have to find updated covariance, use the 2 std dev to find updated correlation. does anyone recollect such a question?
Q 66 is "Market order" as Lesnar pointed said "QUICKLY" thats the key. Hall mark of the exam was for the non numerical questions you could eliminate 2 options quickly other two option required some bit of deep thinking and was often tricky. Imp it did test key ideas.
Q 75 agree with @babyik ...
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