Finishing with the basel questions, the one with countercyclical buffer? did you pick up the last option? the one with 9.5% tier 1 I think
There was a question regarding volatile period followed by a calm period and you we're afraid that the VaR won't capture properly the risks. What would you do?
A- Use volatility weighting with time weighting
B- Decrease the lambda
C and D I don't remember them
I remember thinking that the CET1 minimum ratio is 4.5% (the highest requirement as per Basel III) and if you add to it the counter-cyclical buffer of 2.5% you would get 7%. The 8% CET1 is higher than the minimum requirement + the counter-cyclical buffer so no additional buffer is requiredFinishing with the basel questions, the one with countercyclical buffer? did you pick up the last option? the one with 9.5% tier 1 I think
I remember there was also an option with bootstrapping. The fourth one I do not recall.There was a question regarding volatile period followed by a calm period and you we're afraid that the VaR won't capture properly the risks. What would you do?
A- Use volatility weighting with time weighting
B- Decrease the lambda
C and D I don't remember them
I remember thinking that the CET1 minimum ratio is 4.5% (the highest requirement as per Basel III) and if you add to it the counter-cyclical buffer of 2.5% you would get 7%. The 8% CET1 is higher than the minimum requirement + the counter-cyclical buffer so no additional buffer is required
This one should be volatility weighting. It was mentioned in the text that if historical volatility was 4% and current volatility is say 2% then the historical moves will be multiplied by a factor 4%/2% = 2.I remember there was also an option with bootstrapping. The fourth one I do not recall.
The question said that you wanted to obtain higher VaR.
Apart from the two options provided, which as it has been explained were not correct, the other ones were to use bootstrapping and increase the confidence level
At first I chose bootstrapping, because when doing this you create random samples of historical data and it is more probable that you would end up with lower (older) returns in your samples.
As for the confidence level, which was what I ultimately picked, it depends on the way they meant it or whether I understood the problem correctly: if they referred to confidence level as alpha, then increasing alpha decreases VaR (1-alpha) If they referred to confidence level as 95% VaR, then increasing this would obviously increase your VaR output.
I think I got it wrong.
i think the question was, what increases risk taking behavior not how to mitigate it so i think answer is higher incentive feesOTM FX call follows a vol smile and OTM equity call follows a skew (higher demand for OTM put than OTM call), therefore compared to BSM, OTM FX call will be underpriced and OTM equity will be overpriced. Yes?
http://billiontrader.com/post/85
Question on better risk sharing between hedge funds and investors, it is to apply high-water mark, i.e. reduce hedge fund bonus in times of poor performance. Yes?
http://www.investopedia.com/terms/h/highwatermark.asp