New practice questions
- P1.T2.706. Bivariate normal distribution (Hull) https://forum.bionicturtle.com/threads/p1-t2-706-bivariate-normal-distribution-hull.10190/
- P1.T2.707. Gaussian Copula (Hull) https://forum.bionicturtle.com/threads/p1-t2-707-gaussian-copula-hull.10199/
- P2.T8.703. Value, size and momentum investing (Andrew Ang) https://forum.bionicturtle.com/threads/p2-t8-703-value-size-and-momentum-investing-andrew-ang.10195/
- P2.T8.704. Alpha and effective benchmarks (Andrew Ang) https://forum.bionicturtle.com/threads/p2-t8-704-alpha-and-effective-benchmarks-andrew-ang.10205/
- @emilioalzamora1 with a really informative post on the information ratio (I'm still reading it, lol) : On tracking error and the information ratio https://forum.bionicturtle.com/thre...e-at-risk-tracking-error-var.3634/#post-48127
- And @emilioalzamora1 again with great help on the exponentially weighted moving average (EWMA) volatility https://forum.bionicturtle.com/thre...-portfolio-variance-formula.10201/#post-48161
- CVaR can be defined as UL+EL or UL (although the FRM default is CVaR = UL) https://forum.bionicturtle.com/threads/p-2-credit-var.10200/
- Application of currency swap spreadsheet to Hull’s EOC Question 7.12 https://forum.bionicturtle.com/thre...wap_valuation_learning_spreadsheet_eg2.10178/
- The meaning of Tuckman’s “Unlike the economic intuitions that attach to mean reversion in Vasicek, Model 3's time-dependent volatility relies on the difficult argument that the market has a forecast of short-term volatility in the distant future.” https://forum.bionicturtle.com/thre...rest-rate-volatility-model-3.6721/#post-48105
- Component VaR with matrix math (Jorion’s mapping to forward rate agreement) https://forum.bionicturtle.com/threads/jorion-component-var-matrix-multiplication-going-wrong.10191/
- Interpreting Jorion’s Bankers Trust backtest plot https://forum.bionicturtle.com/threads/jorion-model-evaluation-of-bankers-trust.10192/
- Why might operational risk calculations (for RAROC) be more difficult than credit or market risk? https://forum.bionicturtle.com/thre...and-raroc-in-practice-crouhy.9731/#post-48085
- We are shown two methods for approaching ARAROC which are fundamentally equivalent, although it might be easier to just use Jensen’s alpha https://forum.bionicturtle.com/threads/difference-between-raroc-and-araroc.6669/#post-48087
- Understanding how any derivative can be converted into a zero-cost product (thank you @Shak!) https://forum.bionicturtle.com/thre...drivatives_topic-zero-cost-derivatives.10218/
- The challenging concepts around the impact of default correlation on tranche spreads (senior, junior, mezzanine) https://forum.bionicturtle.com/threads/short-equity-t-long-mezzannine-t-correlation-impact.10203/
- How risk management can create value given financial distress costs https://forum.bionicturtle.com/threads/question-from-creating-value-with-risk-management.10197/
- Why should special repo rates be lower than general collateral rates? https://forum.bionicturtle.com/thre...al-gc-versus-special-repo-rates-tuckman.8431/
- Monetary Policy Report by Federal Reserve Board https://www.federalreserve.gov/monetarypolicy/mpr_20170214_summary.htm
- Wells Fargo’s New Account Openings Down 30% After Fake Account Fiasco https://consumerist.com/2017/02/17/...t-openings-down-30-after-fake-account-fiasco/
- Did Dodd-Frank really hurt the US economy? https://www.ft.com/content/dd4a6698-efe7-11e6-930f-061b01e23655
- The Dodd-Frank Rule Banks Want to Keep (Orderly liquidation authority empowers the federal government to take over and wind down a failing financial firm) https://www.wsj.com/articles/the-dodd-frank-rule-banks-want-to-keep-1487066402
- FINRA and SEC 2017 Exam Priorities: New and Old Themes http://www.garp.org/#!/risk-intelligence/all/all/a1Z40000003PFydEAG
- What You Believe Is the Biggest Obstacle to Global Economic Growth (survey of CFA Institute NewsBrief readers)https://blogs.cfainstitute.org/inve...e-biggest-obstacle-to-global-economic-growth/ 1. Rise of populists movements (35%), 2. Geopolitical tension (26%), 3. Possible trade wars (20%), 4. Lack of global economic coordination (16%), 5. Rising interest rates (4%).
- Global Risks Begin to Recede (It isn’t just the Trump effect; from oil prices to Chinese outflows, the world is looking up) https://www.wsj.com/articles/global-risks-begin-to-recede-1487186308
- From bad to worse: Greece hurtles towards a final reckoning https://www.theguardian.com/world/2...-lenders-demand-austerity-greece-bailout-euro
- Greece is as sick as ever and its agony goes on and on https://www.ft.com/content/d78f73a0-f1d2-11e6-95ee-f14e55513608
- How Toshiba Lost $6 Billion (A botched nuclear bet pushed the company to near financial ruin) https://www.bloomberg.com/news/articles/2017-02-17/how-toshiba-lost-6-billion and a good history lesson by Rod Adams at Forbes http://trtl.bz/2lbL2ZO
- Who’s Sucking Up All the World’s Safest Bonds? (Tightening regulation is causing a dearth of safe assets, with clearinghouses at the center of the issue) https://www.wsj.com/articles/whos-sucking-up-all-the-worlds-safest-bonds-1487251552 “A scarcity of safe collateral can create bouts of volatility in the markets where investors fund their purchases. Economists also worry that a lack of quality public-sector assets leads the private sector to create less reliable and riskier substitutes.”
- The Best Password Managers of 2017 http://www.pcmag.com/article2/0,2817,2407168,00.asp If you don't use a PW manager, please do me a favor and give at least trial a PW manager; identity theft is a nightmare. But it's also super-convenient and time-saving to have quick access to all of your protected websites. We happen to use LastPass (both personal and enterprise) and have been super happy with it, for years; they were acquired by LogMeIn (in Oct 2015). You have several good choices!
- Digital risk: Transforming risk management for the 2020s (McKinsey) http://www.mckinsey.com/business-fu...sk-transforming-risk-management-for-the-2020s
- As Goldman Embraces Automation, Even the Masters of the Universe Are Threatened (Software that works on Wall Street is changing how business is done and who profits from it) https://www.technologyreview.com/s/...n-the-masters-of-the-universe-are-threatened/
- How to Focus Cybersecurity Efforts on Financial Stability https://www.financialresearch.gov/f...yber-security-efforts-on-financial-stability/
- Bank of Tech poses growing threat to traditional institutions (Facebook, Amazon, Alipay and others cut out banks in providing payment services) https://www.ft.com/content/1a862cd2-efd3-11e6-ba01-119a44939bb6
- 9 Things I Learned Working In Blockchain for 24 months https://medium.com/@leecocking/9-th...ckchain-for-24-months-cb64b8605780#.e41u2gb3t
- Oroville Dam: What made the spillway collapse? http://www.mercurynews.com/2017/02/17/oroville-dam-what-made-the-spillway-collapse/ and Dramatic photos show damage to dam’s emergency spillway http://www.mercurynews.com/2017/02/...hotos-show-damage-to-dams-emergency-spillway/ “In a process called cavitation, water flowing fast and in large volumes can rumble over small cracks, bumps or other imperfections in concrete dam spillways as they release water during wet years. The billions of gallons of water bumping off the surface at 50 miles an hour create enormous turbulence that can form tiny water vapor bubbles that collapse with powerful force, and like jackhammers, chisel apart concrete.”
- The crisis at Oroville Dam, explained http://www.vox.com/science-and-health/2017/2/13/14598042/oroville-dam-flood-evacuation “Back in 2005, a handful of environmental groups warned that the dam failed to meet modern safety standards for severe flooding. They urged federal officials to mandate concrete fortifications along the auxiliary spillway as part of the relicensing process for the dam’s hydroelectric plant. But as the Sacramento Bee reports, federal and state officials rejected this request, arguing that a disaster like we’re seeing now was unlikely, and the dam could handle worst-case scenarios.”
- Government severely misjudged strength of Oroville emergency spillway, sparking a crisis http://www.latimes.com/local/california/la-me-oroville-spillway-failure-20170216-story.html
- Antarctic sea ice used to be the darling of climate doubters. Not anymore. https://www.washingtonpost.com/news...-the-darling-of-climate-doubters-not-anymore/
- Energy Companies Face Crude Reality: Better to Leave It in the Ground (High costs, low prices and tough new environmental rules forcing companies to cancel plans to produce oil) https://www.wsj.com/articles/energy...y-better-to-leave-it-in-the-ground-1487327406
- Top 28 Cheat Sheets for Machine Learning, Data Science, Probability, SQL & Big Data https://www.analyticsvidhya.com/blo...arning-data-science-probability-sql-big-data/
- R for Excel Users http://shotwell.ca/blog/post/r_for_excel_users/
- An Introduction to Statistical and Data Sciences via R https://ismayc.github.io/moderndiver-book/
- Theme 7: The need grows for algorithmic literacy, transparency and oversight http://www.pewinternet.org/2017/02/...orithmic-literacy-transparency-and-oversight/
- Anger at Snap’s non-voting shares IPO https://www.irmagazine.com/articles/corporate-governance/21892/anger-snaps-non-voting-shares-ipo/ Here is the letter from the Council of Institutional Investors (CII) http://trtl.bz/2kELJff … and here is Professor Damodaran’s analysis http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-ahead-of-its.html (TL;RD version: he arrives at $11 per share)
- Some Notes on the Cauchy Distribution (how cool is this?!) https://www.rstudio.com/rviews/2017/02/15/some-notes-on-the-cauchy-distribution/ “The extreme values that dominate the Cauchy distribution make it the prototypical heavy-tailed distribution. Informally, a distribution is often described as having heavy or “fat” tails if the probability of events in the tails of the distribution are greater than what would be given by a Normal distribution. While there seems to be more than one formal definition of a [heavy-tailed distribution] (https://en.wikipedia.org/wiki/Heavy-tailed_distribution), the following diagram, which compares the right tails of the Normal, Exponential and Cauchy distributions, gets the general idea across … As exotic as the Cauchy distribution may seem, it is not all that difficult to come face-to-face with the Cauchy Distribution in every-day modeling work. A student t distribution with one degree of freedom is Cauchy, as is the ratio of two independent standard normal random variables.”
- Roll em! How to calculate futures rolls (and why you care) http://adamhgrimes.com/blog/how-to-calculate-futures-rolls/ “In most physical commodities, further out months trade at higher prices than near months. Many things influence this relationship, but one of the major factors is the cost of storing the commodity.”
- Falling Correlations Spell Opportunity for Investors (With stocks, bonds, and commodities no longer rising together, asset allocation suddenly matters again) https://www.wsj.com/articles/falling-correlations-spell-opportunity-for-investors-1487241004
- Why currency manipulation rhetoric will grow louder (Dollar strength has left markets expecting Trump to ratchet up his accusations) https://www.ft.com/content/24d49cac-efae-11e6-ba01-119a44939bb6
- Dole Food Had Too Many Shares https://www.bloomberg.com/view/articles/2017-02-17/dole-food-had-too-many-shares “The way short-selling works is: 1. Mr. A owns a share of stock. 2. Mr. B borrows Mr. A's share of stock. 3. Mr. B sells the share to Mr. C. But now Mr. A and Mr. C each own one share of stock. Where there was only one share, now there are two. A "phantom share" has been created. Well, not really. The trick to balancing the books is to remember that Mr. B owes Mr. A a share of stock. So Mr. B now owns negative one share of stock. There's a total of one share: one for A, and one for C, and negative one for B. One plus one minus one is one. It's no problem.”
- Should Stocks Be Worth More Now Than They Used To Be? http://theirrelevantinvestor.com/2017/02/13/should-stocks-be-worth-more-now-than-they-used-to-be/
- The evolution of model risk management (McKinsey) http://www.mckinsey.com/business-functions/risk/our-insights/the-evolution-of-model-risk-management
- How to Use Models for Disciplined Flood Risk Underwriting http://www.air-worldwide.com/Blog/How-to-Use-Models-for-Disciplined-Flood-Risk-Underwriting/
- Sovereign cat bonds can help governments borrow, improve welfare http://www.artemis.bm/blog/2017/02/...-can-help-governments-borrow-improve-welfare/
- Alpha or Assets http://investorfieldguide.com/alpha-or-assets/
- Factor Investing and Asset Allocation: A Business Cycle Perspective [library]
- SPY: The Idea that Spawned an Industry http://blog.spdrs.com/post/spy-the-idea-that-spawned-an-industry (included due to their role in the new Andrew Ang readings)
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