P1.T4. Spreadsheet Dowd

[Johnny Firpo]

Hi David, is there a spreadsheet available for "Dowd: Measures of financial risk"? (I am asking because this is a chapter where I feel a spreadshet would help me very much, especially in understanding the practical calculation of ES). If there is a spreadsheet, I couldn't find it... Furthermore: What would you think is the most difficult question we can expect in the exam? As the ES formula involves integrating and the Spectral Risk Measure integrating and calculating weighting averages it would be very helpful to estimate how intense we should cope with this topic. Thank you! Johnny

 

[David Harper CFA FRM]

Hi Johnny,

Not yet, but it's coming ASAP (T5.32.3 Dowd Measures) ... I agree the XLS is important for Dowd's chapter ...

Re: most difficult question: For Part 1 FRM, GARP does not tend to exploit Dowd deeply:

• Most likely is a question about discrete ES; i.e., average the tail of a sequence, possibly weighted such that you really do want to understand the discrete ES, but more likely simple average
• Also likely is qualitative question about coherence (sub-additivity)
• To my knowledge, so far spectral has not really been tested
• Application of spectral (e.g., the integral form) is extremely unlikely to get onto the exam in any sophisticated way. We've been trying to explain to GARP that this AIM is technically incorrect: "... explain how VaR and ES are special cases of spectral risk measures."; i.e., VaR is not a special case of spectral (which helps to explain how VaR is not coherent, yet spectral measures are coherent), rather VaR is special case of the general risk measure (2.7) and so are spectral risk measures a special case of (2.7) which includes ES, but not VaR ... so i can't imagine they will engage into spectral deeply. Dowd presents tougher related issues in Part 2 frankly, where the over-assignment is much worse than here in P1. Thanks,

 

[Johnny Firpo]

Great to hear!
Thx!