Course Errors Found in 2021/2022 Study Materials P2.T6. Credit Risk

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Nicole Seaman

Director of CFA & FRM Operations
Staff member
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Please use this new thread to let David and I know about any errors, missing/broken links, etc. that you find in the 2021/2022 materials that are published in the study planner under P2.T6. Credit Risk. This will keep our forum much more organized. We appreciate your cooperation! :)

PLEASE NOTE: Our Practice Question sets already have links to their specific forum threads where you can post about any errors that you find. This thread is for any other materials (notes, spreadsheets, videos, etc.) where you might find errors.

Information needed for us to correct errors:

  • Reading
  • Page number
  • Error
 
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kchristo

Member
When reviewing the study notes for DeLaurentis, it seems like there are a lot of errors. What is the general advice for this section - should we still memorize the formulas, or just know the difference between the general default terms in the reading? Also, what does "Error! Bookmark not defined." mean?
 

Nicole Seaman

Director of CFA & FRM Operations
Staff member
Subscriber
When reviewing the study notes for DeLaurentis, it seems like there are a lot of errors. What is the general advice for this section - should we still memorize the formulas, or just know the difference between the general default terms in the reading? Also, what does "Error! Bookmark not defined." mean?
Hello @kchristo I just downloaded the study notes from the study planner and I am not seeing any bookmark errors. Can you tell me which pages you are seeing this error on? Can you also please be more specific about what you mean when you say "a lot of errors"? Do you mean errors in the content?
 

kchristo

Member
Hey @Nicole Seaman thanks for the quick reply. Most of the bookmark errors I found are on page 9 of the pdf. There's also a separate, additional error where the equation on p. 15 is missing a leading N(), in that the parentheses aren't wrapped by the cumulative standard normal operator.

With regard to my comment on a lot of errors, I was just going off David's note at the start of the study notes, where he says there are technical errors in the source text. I was curious if the bookmark not defined errors quoted above were in context to the errors in the source material, or some BT note (which it sounds like they are).
 

Nicole Seaman

Director of CFA & FRM Operations
Staff member
Subscriber
Hey @Nicole Seaman thanks for the quick reply. Most of the bookmark errors I found are on page 9 of the pdf. There's also a separate, additional error where the equation on p. 15 is missing a leading N(), in that the parentheses aren't wrapped by the cumulative standard normal operator.

With regard to my comment on a lot of errors, I was just going off David's note at the start of the study notes, where he says there are technical errors in the source text. I was curious if the bookmark not defined errors quoted above were in context to the errors in the source material, or some BT note (which it sounds like they are).
@kchristo I've fixed the bookmark errors. Those are only formatting errors caused by the footnotes. This set of notes was just updated last week, so there should not be errors in the content. I will have David confirm the error that you posted regarding the parentheses. At the beginning of the study notes, David is referring to errors in the source DeLaurentis book (author errors), so he is not referring to errors in our notes. I hope this helps to clear up any confusion.
 

kchristo

Member
In Gregory, chapter 11, under the objective: Explain how payment frequencies and exercise dates affect the exposure profile of various securities, the wording is contradictory.


"If payments are made more frequently than received, then the exposure is reduced. On the other hand, if payments made are more frequent than payments received, the exposure is incrementally increased."

I think the second "increased" should read "decreased".
 

kchristo

Member
In Gregory, P.74, on the difficult CVA calculation, at the bottom:
In first year, mPD is same as PD at 9.52%, in 2nd year, mPD = 18.1% -9.5% =9.52%,

Should read:
In first year, mPD is same as PD at 9.52%, in 2nd year, mPD = 18.1% -9.5% =8.61%,
 

bollengc

Member
hi David @David Harper CFA FRM and Nicole @Nicole Seaman ,

I am on T6-R12-P2-Malz-v3, Chapter 7: Spread Risk and Default Intensity Models - page 11
This is an example of Poisson and exponential. (could have been nice to find it as well in the excel spreadsheet available for those chapters)
Under the Poisson section, there is both P(X=k) and P(X<k).

1644658738494.png
First I have a question: is there a direct formula to compute P(X<50) other than summing up the outcomes of P(X=n) for n<50?

Second part is a possible typo as I computed it and it looks like P(X<50)=59.46% whereas you displayed P(X<=50)

1644658892580.png

if this is false, then 2nd example needs to be fixed as well on the same page.

1644659016813.png1644659038053.png

sorry if it might be some tiny numerical typo but I like understanding those to make sure I get the concept behind it.
have a nice week-end,
Camille
 

David Harper CFA FRM

David Harper CFA FRM
Subscriber
Hi Camille (@bollengc ) I appreciate your attention to detail! As confirmed by your spreadsheet, the minor typo in my spreadsheet is:
  • Where I have "Prob (X < k) over M units" it should be "Prob (X ≤ k) over M units"
To answer your first question (and confirm the difference), my XLS uses =POISSON.DIST(D9,D6,TRUE) and specifically:
= POISSON.DIST(50, 48, TRUE) = 64.87%, but if i change it to:
= POISSON.DIST(49, 48, TRUE) = 59.46%.

This POISSSON.DIST(x, mean, cumulative) is giving, due to the "TRUE" parameter, a CDF such that I am returning "less than or equal to" the X value. So I think everything in the XLS looks fine, except my label should be Prob (X ≤ k) rather than Prob (X < k). And, yes, although the Poisson pdf for an exact value is easy to find per Prob(X = k) = λ^k*exp(-λ)/k!, to my knowledge the CDF has not easy analytical reduction. Have a good weekend. Thank you!
 

bollengc

Member
hi David (@David Harper CFA FRM ),

on T6-R13-P2-Gregory-v15, chapter 11 Future Value and Exposure, p58

1645115660960.png

1st sentence: if payments are made more frequently than received -> exposure is reduced
2nd sentence: if payments made are more frequent than payment received -> exposure is incrementally increased

the beginning of both sentences are the same but the conclusion is different :)

I am not too sure of the example given in the 3rd sentence.
I would say that if we receive payments more frequently than we pay, we have realized gain (not unrealized) so our exposure should be reduced.
or am I missing sthg?

thanks,
Camille
 

yLam4028

Active Member
Hello Nicole,

Page 56 question 325 - the link at the end directs us to question 410 instead. Thank you!

best regards,
Casey
 

Nicole Seaman

Director of CFA & FRM Operations
Staff member
Subscriber
Hello Nicole,

Page 56 question 325 - the link at the end directs us to question 410 instead. Thank you!

best regards,
Casey
@yLam4028 It took me a few minutes to figure out which reading you were referring to because you posted in the Topic 5 error thread, but you are referring to Gregory, which is in Topic 6. I've moved it to this correct thread, but in the future, please make sure to post the reading/chapter/author so we can quickly figure out which document you are referring to. We will make sure this is updated when we go through the Topic 6 errors and update the PDFs. Thank you.
 

rajvar67

New Member
I guess the highlighted needs correction. Both sentences are giving same meaning. The first sentence should be "payments are made less frequently"

1694336905131.png
 
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