New practice questions
- P2.T9.701. Bitcoin risks and regulation https://forum.bionicturtle.com/threads/p2-t9-701-bitcoin-risks-and-regulation.10286/
- P2.T9.702. Dudley on market and funding liquidity https://forum.bionicturtle.com/threads/p2-t9-702-dudley-on-market-and-funding-liquidity.10298/
- P2.T9.703. Drivers of market liquidity (IMF) https://forum.bionicturtle.com/threads/p2-t9-703-drivers-of-market-liquidity-imf.10301/
- P2.T9.704. Algorithmic trading (Senior Supervisors Group) https://forum.bionicturtle.com/threads/p2-t9-704-algorithmic-trading-senior-supervisors-group.10304/
- Conditions for the Durbin-Watson test (and therefore limitations of this test we sometimes take for granted!) by @emilio https://forum.bionicturtle.com/thre...o-model-seasonality-diebold.10131/#post-48701
- Why are there two ways to calculate the joint default probability of two bonds, an easy way and a copula way? https://forum.bionicturtle.com/threads/p2-t5-505-copula-functions-meissner.8230/page-2#post-48716
- True or False? For a given bond with a fixed coupon rate, an increase in the bond's maturity implies a decrease in the bond's yield (YTM) https://forum.bionicturtle.com/threads/p1-t4-14-yield-to-maturity-ytm.4940/page-2#post-48666
- How to get the 99% normal expected shortfall (ES) https://forum.bionicturtle.com/threads/var-and-es.9497/#post-48708
- A more efficient calculation of Kendall’s Tau (concordant and discordant pairs) than mine, by @cbrach https://forum.bionicturtle.com/thre...-concordant-discordant-pairs.8209/#post-48727
- If a manager’s bond portfolio has a higher 30-year key rate duration than her benchmark index, but they have the some overall duration, does the manager over- or under-perform if there is a yield curve steepening? https://forum.bionicturtle.com/threads/tuckman-muli-factor-risk-hedges.9403/
- Cindy asks “If I am trying to value a 7 years callable bond using binomial tree, how do I decide the initial rate, short rate volatility and strength of mean reversion K?” https://forum.bionicturtle.com/thre...ss-cir-interest-rate-process.6731/#post-48732
- Where does the provision of expected loss manifest itself? https://forum.bionicturtle.com/threads/p2-t7-406-basel-iii-liquidity-standards.7950/#post-48712
- Factors that impact the CDS-bond basis https://forum.bionicturtle.com/threads/cds-bond-basis-factors-confusing-impact.10284/
- Just like with portfolio VaR, the sequence of trade DOES matter for incremental CVA (and is analog incremental VaR) but does NOT matter for marginal CVA (nor its analog component VaR) https://forum.bionicturtle.com/thre...-credit-value-adjustment-cva.7254/#post-48633
- From FRM context, is Value-at-Risk and Economic Capital both one and the same? https://forum.bionicturtle.com/thre...economic-capital-both-one-and-the-same.10306/
- Where does unexpected loss formula come from? https://forum.bionicturtle.com/thre...apital-rarorac-de-laurentis.10078/#post-48750
- What is wrong-way risk for a credit default swap (CDS)? https://forum.bionicturtle.com/threads/p2-t6-607-credit-default-swaps-crouhy.9291/#post-48758
- Why does Gregory use duration to convert an upfront CVA to a running spread? https://forum.bionicturtle.com/threads/dividing-cva-by-duration-gives-credit-spread.10294/
- What exactly is procyclical regulation? (and a great paper on the topic) https://forum.bionicturtle.com/threads/l2-t7-b10-reasons-for-basel-iii.4470/#post-48725
- Banking Standards Board (First) Annual Review 2016/2017 http://trtl.bz/2mof0He via Shortfall in Bank Ethics Stretches to the Very Top http://trtl.bz/2mWxtyp
- Goldman Sachs Goes on Buying Binge for Delinquent Mortgages (The bank has spent roughly $4.5 billion on 26,000 Fannie-owned loans) https://www.wsj.com/articles/goldman-sachs-goes-on-a-mortgage-buying-binge-1489656600
- How Consumer Relief After Mortgage Crisis Can Enrich Big Banks https://www.nytimes.com/2017/03/17/business/dealbook/mortgage-crisis-consumer-relief.html
- Deutsche Bank Looks to Lend Its Way Out of Mortgage Mess (German bank takes different path than Goldman Sachs to meet homeowner-relief goal in settlement) https://www.wsj.com/articles/deutsche-bank-looks-to-lend-its-way-out-of-mortgage-mess-1489784469
- Bank Overdraft-Fee Revenue Bounces Back (The 2016 fees were the highest since 2009, the year before the Fed implemented a rule stopping banks from automatically charging overdraft fees on some transactions) https://www.wsj.com/articles/bank-overdraft-fee-revenue-bounces-back-1489656603
- Capital Illogic http://johnhcochrane.blogspot.co.uk/2017/03/capital-illogic.html on the heavily commented: More Bank Capital Could Kill the Economy Regulators sparked the Great Recession with a credit crunch. Now they want to do it again https://www.wsj.com/articles/more-bank-capital-could-kill-the-economy-1489446254
- FT Explainer: Dodd-Frank picked to pieces https://www.ft.com/content/915666b6-f928-11e6-bd4e-68d53499ed71
- Why Banking Leverage Requirements Are Not Enough http://rooseveltinstitute.org/why_we_need_both_capital_requirements/
- SEC Enforcement: 2016 in Review and Looking Ahead to 2017 https://corpgov.law.harvard.edu/2017/03/15/sec-enforcement-2016-in-review-and-looking-ahead-to-2017/
- Focus on Bank Culture Is an Odd Regulatory Strategy https://www.nytimes.com/2017/03/14/...nk-culture-is-an-odd-regulatory-strategy.html
- AI, Blockchain and Consumer Protection: The FTC Is Watching (GARP) http://www.garp.org/#!/risk-intelligence/technology/disruptive-technologies/a1Z40000003PO21EAG
- Federal Reserve Board's website has a new design https://www.federalreserve.gov/newsevents/pressreleases/other20170320a.htm
- Bitcoin Miners Signal Revolt Amid Sluggish Blockchain https://www.bloomberg.com/news/arti...nal-revolt-in-push-to-fix-sluggish-blockchain “Now, after more than two years of bitter infighting among the global bitcoin community about how to fix the problem, some of its most influential members are giving up on reaching consensus. Instead, they’ve begun backing a controversial solution known as Bitcoin Unlimited. If the gamble pays off, it could ease congestion and may help bring the community back together. If it fails, the digital currency could face a hard fork into separate variants, effectively splitting bitcoin into two currencies.”
- The Bitcoin Backlog http://elaineou.com/2017/03/17/the-bitcoin-backlog/
- Untested Robo-Advisers Are Becoming a Big Market Risk https://www.bloomberg.com/view/arti...-robo-advisers-are-becoming-a-big-market-risk
- The OCC Publishes Details on the Fintech Charter http://www.lendacademy.com/occ-publishes-details-fintech-charter/
- Blockchain Technology: Balancing Benefits and Evolving Risks http://www.treasuryandrisk.com/2017/03/09/blockchain-technology-balancing-benefits-and-evolv
- The Fintech Files: Three Truths and Two Myths https://blogs.cfainstitute.org/investor/2017/03/14/the-fintech-files-three-truths-and-two-myths/
- Resilience – Overcoming natural disasters http://trtl.bz/2mFIkfG Here is the 80-page report http://trtl.bz/2nhbfbo and Natural catastrophes 2016 (The year in pictures) https://www.munichre.com/en/reinsur...topics-geo/loss-events-in-pictures/index.html
- Exclusive: BlackRock vows new pressure on climate, board diversity http://www.reuters.com/article/us-blackrock-climate-exclusive-idUSKBN16K0CR “Outlining its priorities, BlackRock urged some companies to be ready to discuss concerns such as how they could use climate-risk disclosure practices developed by a Financial Stability Board task force. BlackRock also said it will expect that at companies in sectors associated with climate risk such as oil producers, miners or real estate companies, all directors should "have demonstrable fluency in how climate risk affects the business" and how a given company will address it.”
- Climate Science: A Guide to the Public Debate by the Niskanen Center (a libertarian think tank) http://trtl.bz/2nU5ZH5
- The Great Lie of American Flood Risk https://www.wired.com/2017/03/great-lie-american-flood-risk/
- Let's Talk: Assessing Natural Catastrophe Exposures In Global Programmes http://xlcatlin.com/fast-fast-forwa...al-catastrophe-exposures-in-global-programmes
- The World Is Completely Unprepared for a Global Pandemic https://hbr.org/2017/03/the-world-is-completely-unprepared-for-a-global-pandemic
- Exams, Financial Associations (GARP, FRM, CFA Institute) and Careers, including CRO Interviews
- Goldman Unveils Largest Redesign of Its Trading Hub https://www.bloomberg.com/news/arti...rgest-redesign-of-trading-hub-since-09-launch
- This Big-Hearted Banker Emerged From the Collapse a Billionaire https://www.bloomberg.com/news/arti...-emerged-from-the-collapse-a-billionaire-hero
- Wells Fargo CISO Says Cyber Investments Pointing Way to Better Risk Management http://blogs.wsj.com/cio/2017/03/13...ments-pointing-way-to-better-risk-management/ “Mr. Baich said the most important metric he tracks is a cyberattack’s probability of occurrence.”
- The Spider Network (The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History). NY Times Review https://www.nytimes.com/2017/03/17/...network-an-intriguing-tale-of-complicity.html “David Enrich manages to make Libor interesting and demonstrates the continuing relevance of a financial scandal that enveloped many of the world’s largest banks … as entertaining as the colorful character portraits are, what makes [the book] truly memorable are the portraits of the various institutions that made the scandal not just possible but inevitable.” Excerpt here at WSJ https://www.wsj.com/articles/a-trap-for-tom-hayes-1489760139 and the book is here http://amzn.to/2n101VH
- Book Review: Too Little, Too Late: The Quest to Resolve Sovereign Debt Crises (CFA Institute) https://blogs.cfainstitute.org/investor/2017/03/16/book-review-too-little-too-late/ Book is here http://amzn.to/2neZP7l
- Eyes Wideo Open (Review by Brenda Jubin) http://readingthemarkets.blogspot.com/2017/03/lidsky-eyes-wide-open.html
- 61 Books Nassim Taleb Recommends you Read in his Own Words https://medium.com/the-mission/61-b...read-in-his-own-words-fc2e17a7f3c1#.os6laj3cn
- The Way Credit Scores Are Calculated Is Changing, And Millions Of People’s Scores Will Rise https://www.buzzfeed.com/matthewzeitlin/millions-of-peoples-credit-scores-will-get-a-boost-this-year
- A boardroom shift is required to counter cyber threats https://www.ft.com/content/92a651d0-05bb-11e7-aa5b-6bb07f5c8e12
- The Board (early stage) http://pointsandfigures.com/2017/03/14/the-board/
- Financial Crisis, Corporate Governance, and Bank Capital https://corpgov.law.harvard.edu/2017/03/17/financial-crisis-corporate-governance-and-bank-capital/
- CorpGov Roundup: Hot Topic is Whether Dual Class Shares Should Be Allowed https://blogs.cfainstitute.org/mark...-whether-dual-class-shares-should-be-allowed/
- Glass Lewis 2017 Proxy Season Preview – North America http://www.glasslewis.com/2017-season-preview-northamerica/
- Board of Directors Compensation: Past, Present and Future https://corpgov.law.harvard.edu/2017/03/14/board-of-directors-compensation-past-present-and-future/
- Hedge Fund Titan’s Surefire Bet Turns Into a $4 Billion Loss (Ackman’s Valeant) https://www.nytimes.com/2017/03/19/business/william-ackman-pershing-valeant.html and Barry Ritholtz: Ackman's Valeant Bust Shows the Cost of Inconsistency https://www.bloomberg.com/view/arti...-valeant-bust-shows-the-cost-of-inconsistency
- Introduction to Conditional Probability and Bayes theorem for data science professionals https://www.analyticsvidhya.com/blog/2017/03/conditional-probability-bayes-theorem/
- Simulating Correlated Random Walks for the S&P 500 https://mktstk.com/2017/03/16/simulating-correlated-random-walks-for-the-sp-500/
- Federal Reserve issues FOMC statement https://www.federalreserve.gov/newsevents/pressreleases/monetary20170315a.htm “In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”
- The Fed’s Era of Easy Money Is Ending https://www.nytimes.com/2017/03/13/upshot/the-feds-era-of-easy-money-is-ending.html “The officials appear to have plotted a course to raise rates a few times a year with expectations of reaching the so-called neutral rate — at which monetary policy is neither stimulating nor slowing the economy — near the end of 2019. As of their December meeting, Fed leaders think that neutral rate is 3 percent.”
- Fed’s Challenge, After Raising Rates, May Be Existential https://www.nytimes.com/2017/03/14/business/economy/fed-opposition-interest-rates.html
- Bain & Company’s Global Private Equity Report 2017 http://trtl.bz/2n2J6V5 with commentary at https://ftalphaville.ft.com/2017/03/13/2185852/trouble-ahead-for-pe-investors/
- The New Bond Workouts (SSRN) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2909186
- The Fed's Global Dollar Problem https://www.bloomberg.com/view/articles/2017-03-19/the-fed-s-global-dollar-problem “If the Fed sticks with its plan of raising rates more than a percentage point by the end of next year, the increased interest costs could stunt growth and weigh on borrowers' finances in places as far flung as the U.K. and China. It could also mean losses for investors holding the debt, particularly given that the duration of dollar-denominated bonds -- a measure of their price sensitivity to changes in interest rates -- is close to its highest point in at least two decades.”
- A Strong Dollar Isn't That Great for America https://www.bloomberg.com/view/articles/2017-03-17/a-strong-dollar-isn-t-that-great-for-america
- Of Goosebumps and CCP [central counterparty] default funds https://bankunderground.co.uk/2017/03/20/of-goosebumps-and-ccp-default-funds/
- Cost of Repo Safety Net Hits $74 Billion (The cost of backstopping repurchase agreements has risen from a $50 billion estimate circulated two years ago) https://www.wsj.com/articles/cost-of-repo-safety-net-hits-74-billion-1490014800
- Low VIX Got You Down? These Fear Gauges May Do the Trick https://www.bloomberg.com/news/arti...t-you-down-these-fear-gauges-may-do-the-trick “Here are some other [fear] gauges that could be used to supplement or outright replace the VIX … 1. Dollar [Researchers at the Bank for International Settlements say the dollar is becoming the best fear gauge as its appreciation can depress demand for credit while also reflecting reduced investor appetite for the riskiest assets], 2. Global Financial Stress Index, 3. CBOE SKEW Index, 4. Yield Volatility, 5. The Challengers, 6. Credit Suisse Fear Barometer.”
- Americans Shun Life Insurance, Forcing New Tactics at Prudential https://www.wsj.com/articles/americ...-forcing-new-tactics-at-prudential-1489662002
- Sovereign spreads in the Eurozone on the rise: Redenomination risk versus political risk http://voxeu.org/article/sovereign-spreads-eurozone-redenomination-versus-political-risk
- Valuation Shell Game: Silicon Valley’s Dirty Secret https://www.nytimes.com/2017/03/08/...-shell-game-silicon-valleys-dirty-secret.html “This type of valuation [409A valuation] allows hot, privately owned technology companies — like Uber, Airbnb or Nextdoor — to issue common stock or stock options to employees at a low price and, at the same time, or nearly the same time, sell preferred stock to outside investors at a price that is often three or four times higher.”
- Unintended consequences: specializing in risky mortgages under Basel II https://bankunderground.co.uk/2017/...ecialising-in-risky-mortgages-under-basel-ii/
- Allstate’s new Sanders Re 2017 has an industry loss element http://www.artemis.bm/blog/2017/03/14/allstates-new-sanders-re-2017-has-an-industry-loss-element/ “As the industry loss index total for auto and wind pool losses is added to the UNL total of indemnity losses, in order to define whether the bond is triggered, the index related elements are really a secondary input to the overall loss calculation for this deal.”
- Did Xie Zhikun’s Nearly $1 Billion Go Missing? A Private-Equity Mystery (How does this happen?!) https://www.wsj.com/articles/did-xi...o-missing-a-private-equity-mystery-1489698624
- In Puerto Rico, Teachers’ Pension Fund Works Like a Ponzi Scheme https://www.nytimes.com/2017/03/08/business/dealbook/puerto-rico-teacher-pensions.html “Puerto Rico, where the money to pay teachers’ pensions is expected to run out next year, has become a particularly extreme example of a problem facing states including Illinois, New Jersey and Pennsylvania: As teachers’ pension costs keep rising, young teachers are being squeezed — sometimes hard. One study found that more than three-fourths of all American teachers hired at age 25 will end up paying more into pension plans than they ever get back.”
- Private Equity Returns Still Outperform Public Markets https://www.forbes.com/sites/bainin...quity-returns-still-outperform-public-markets Report is here http://trtl.bz/2n2J6V5
- Goldman Sachs’ lessons from the Quant Quake (Nearly 10 years after its nadir, quantitative investing is again the hot trend in finance) https://www.ft.com/content/fdfd5e78-0283-11e7-aa5b-6bb07f5c8e12 “Quantitative investing is once again the hottest trend in finance. Computer-driven hedge funds have just notched up their eighth straight year of client inflows, doubling their assets from 2009 to $918bn, according to Hedge Fund Research. Even this understates the interest, as many traditional hedge funds and big mutual fund managers are all trying to blend more quantitative techniques with their traditional approaches … Understanding how markets function increasingly requires knowledge of a Greek-based alphabet soup of concepts and phenomena — such as alpha generation, smart beta, gamma scalping, delta hedging and option theta. Their speed has accelerated markedly, and the number of market anomalies, odd trading patterns and mysterious “flash crashes” have increased in tandem with the ascent of algorithms.”
- Getting Through the Long Post-Crisis Hangover https://www.bloomberg.com/view/articles/2017-03-13/getting-through-the-long-post-crisis-hangover “To oversimplify wildly: In a world of secular stagnation, we have financial bubbles and busts because the underlying rate of economic growth is so slow. In a world of financial cycle drag, we have slow economic growth because financial volatility is weighing on the economy.” (Reinhart and Rogoff’s This Time is Different was assigned in the 2010 FRM, before the “brand-tainting controversy” that featured model risk!)
- Currency Traders Race to Reform ‘Last Look’ After Bank Scandals https://www.bloomberg.com/news/arti...-race-to-reform-last-look-after-bank-scandals “Last look gives a market maker, such as a dealer, time to back out of a trade. Some argue that the practice has merits, allowing market makers to quote better prices. But a firm could unfairly learn a counterparty’s intentions without having to complete the transaction. The Bank of England has said the practice is vulnerable to misuse.”
- Factor Investing and the Importance of Market Cycles http://www.allaboutalpha.com/blog/2017/03/15/factor-investing-and-the-importance-of-market-cycles-2/
- Super-easy monetary policy and reflating Japan’s economy: The Bank of Japan’s mission is incomplete http://voxeu.org/article/super-easy-monetary-policy-and-reflating-japan-s-economy “The negative interest rate policy lowered the entire yield curve and resulted in reducing longer-term yields to a significant degree. While the BOJ emphasised this was a result of its successful monetary policy, the negative interest rate policy raised a number of concerns and has potential side effects. These adverse impacts can be classified into four issues: a decline in the profitability of the financial sector and potential financial instability risk; promotion of cash substitution and a deterioration in households’ sentiments; a decline in liquidity and weakened functions of the JGB markets; and the BOJ’s operational challenges and balance sheet risk.”
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