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Yes, but there was also some example related to waterfall structure in Schweser and even in BT where the OC got funded after the equity and there was some equity limit mentioned in the question. Under which circumstance does that happen?

Here, there was a limit given to the OC account- don't remember the value. So, after deducting for senior and mezzanine, the OC could get its limit and then the remaining could still go to equity. But the confusion is whether L-B goes to equity first or OC first. I have seen both conventions...

Long USD spot, long US t-bill and short JPY. Basically, this goes by the forward rate formula we learnt in L-1.

Yes, I agree with you. GARP wordings were quite misleading at times.

It is 0.035/0.7=0.05

Yes, I went with policy-mix risk for this one. It is about allocating weights to different assets to the portfolio and why one is not good for high weightage relative to the other- so looks like policy-mix risk. Funding risk is about risks related to borrowing and getting funds at reasonable...

Exactly my point. This question was doable but just threw me off and wasted my time because of this confusion.

In this problem, I did ((1/1.04+1/1.06)*.5)/1.05=0.907. The zero rate comes out to be around 4.9% and hence the convexity is just .47 bps. I was hence not getting either 0.84 or 1.82 bps in the exam and this just threw me off for a while. Please clarify.

Since the Y-axis mentions benefit=1-netting factor, the choice will be (b),ie., the curve first rises exponentially and then flattens. If it was only netting-factor, the plot would be like (d). You can check the plot by entering some numbers in excel,entering that formula in a column and then...

Not sure of these answers. I also chose replacement. Bootstrap leads to more accurate VaR estimations due to resampling, but is it necessarily higher?

There is a formula for netting factor given in BT as well as Schweser. The (1-netting factor) is the benefit and the plot of this wrt n gives an initially increasing function which then flattens. Here the benefit of diversification is always there as n becomes larger and larger but the rate of...

Yes, that is another way to look at this-the difference between the two deltas is constant, so they have to move in same direction.

No, on that graph, it shows variation of delta with moneyness,ie., how much "in the money" or "out the money" the option is in. So, the more ITM a call option is, the more positive its delta and more ITM a put is, the more negative its delta. Now as underlying value falls, call option becomes...

Yes you will need more of the underlying in case of shorting a put option but I think here it is not about magnitude alone. Put delta is negative so its rise in magnitude means it reduces.

It is about the change in price (delta) and not price itself. The put delta does increase in magnitude but is negative, (like changing from -1 to -3) so it reduces, ie., becomes more negative.

The ES question just involved finding the average of the lowest 5 returns. Something like 2.22 was the answer. I am not sure about the answer of that floating leg value question either. For a float leg, the PV becomes the principal itself as future CFs are the floating rates and they are also...

Yes. Found it....thanks....

I have also marked this one but I can't see any material in assigned readings which points out this cause. Can anyone mention if there is any?

What should be the answer to that question where it was given that in 250 days a model VaR gave 12 defaults but immediately the day after a default, 6 other defaults happened? What could have been ignored by the model?

In the question on delta of call and put, I think both should decrease if we consider on basis of pure number rather than magnitude. The call option delta will obviously decrease and the put option delta will become more negative, so even that should decrease. For RAROC will decrease below 9.5%...