New practice questions
- P1.T3.702. Life insurance products and mortality tables (Hull) https://forum.bionicturtle.com/thre...nce-products-and-mortality-tables-hull.10260/
- P1.T3.703. Insurance company ratios (Hull) https://forum.bionicturtle.com/threads/p1-t3-703-insurance-company-ratios-hull.10268/
- P2.T8.707. The biases of illiquid markets (Ang) https://forum.bionicturtle.com/threads/p2-t8-707-the-biases-of-illiquid-markets-ang.10266/ and thank you @emilioalzamora1 for commenting here that “In November 2016 GARP tested the concept of unsmoothing returns in detail (answers A and B to questions 707.3 have been very similar as given above!). Just make sure that you prepare this properly. It is highly likely to show up in one of the 2017 exams again I suppose.”
- P2.T8.708. Illiquidity risk premium & portfolio choice decision on the inclusion of illiquid assets https://forum.bionicturtle.com/thre...on-on-the-inclusion-of-illiquid-assets.10270/
- Nicole got confirmation that GARP’s essential exam methodology has not changed (except that “if anything we have more working professionals from around the world in developing the exam questions and what the topics should be”) https://forum.bionicturtle.com/thre...nancial-crisis-brunnermeier.10077/#post-48483
- Great job by @olgenue spotting a likely mistake in Giacomo De Laurentis https://forum.bionicturtle.com/thre...tudy-notes-p2-t6-credit-risk.8759/#post-48455
- Specific illustration of Malz’s liquidity cost concepts (and their reconciliation with Dowd) https://forum.bionicturtle.com/thre...-liquidity-adjusted-var-malz.8393/#post-48532
- I think there are two acceptable calculations of SAMPLE skew and sample kurtosis, but Miller’s matches Excel, so you can’t go wrong with his approach https://forum.bionicturtle.com/thre...nce-covariance-skew-kurtosis.3636/#post-48526
- Specific breakdown (with XLS) of question T7.510.3 which mimics Malz with three transactions posted to an economic balance sheet https://forum.bionicturtle.com/threads/p2-t7-510-balance-sheet-leverage-malz.8387/#post-48481
- On the difference between backtest significance and VaR confidence, and which backtest error (Type I or Type II) are regulators trying more to avoid? https://forum.bionicturtle.com/threads/l2-t5-60-basel-ima-backtest.3610/page-2#post-48499
- Can we extend the bootstrap sample? https://forum.bionicturtle.com/threads/l1-t2-99-bootstrap-method.3912/
- Further interpretation of Linda Allen’s worst-case scenario (WCS) table 3.5 https://forum.bionicturtle.com/thre...rst-case-scenarios-allen-3-3.7209/#post-48458
- Asian options https://forum.bionicturtle.com/thre...ch26_exoticoptions_topic-asian-options.10271/
- Berrymucho with helpful sources: Retail vs. corporate credit default (time of default) https://forum.bionicturtle.com/thre...dit-default-time-of-default.10251/#post-48444
- Thank you @OMAR for help with basic anti-derivative rules https://forum.bionicturtle.com/threads/p1-t2-300-probability-functions-miller.6728/page-4#post-48437
- How I think about barrier options https://forum.bionicturtle.com/thre...26_exoticoptions_topic-barrier-options.10262/
- Which futures contract sizes do we need to know, if any https://forum.bionicturtle.com/thre...contracts-topic-review.5989/page-2#post-48429
- On the sometimes tricky idea that in Bodie’s APT model, each factor has an expected value of zero such that the model is really about an expected return plus surprise(s) in the systematic variable(s) https://forum.bionicturtle.com/thre...diversified-portfolios.7492/page-2#post-48405
- JPMorgan Software Does in Seconds What Took Lawyers 360,000 Hours https://www.bloomberg.com/news/arti...n-army-of-developers-to-automate-high-finance “The program, called COIN, for Contract Intelligence, does the mind-numbing job of interpreting commercial-loan agreements …”
- Morgan Stanley’s Revised Capital Plan Approved by Fed https://www.wsj.com/articles/morgan-stanleys-revised-capital-plan-approved-by-fed-1488490210
- Fidelity, Charles Schwab Slash Online Trading Commissions https://www.wsj.com/articles/fidelity-drops-online-trading-commissions-by-38-to-4-95-each-1488258061
- Are Bank Fiduciaries Special? https://corpgov.law.harvard.edu/2017/02/28/are-bank-fiduciaries-special/
- World’s Biggest Banks Fined $321 Billion Since Financial Crisis https://www.bloomberg.com/news/arti...anks-fined-321-billion-since-financial-crisis
- Are Basel's Capital Surcharges for Global Systemically Important Banks Too Small? By Federal Reserve http://trtl.bz/2lwOMXv
- Former Regulators Warn Against Financial Deregulation (‘Now is not the moment to relax or to retreat,’ Systemic Risk Council tells G-20 leaders) https://www.wsj.com/articles/former-regulators-warn-against-financial-deregulation-1488193200
- China's Hidden Risks Rise https://www.bloomberg.com/view/articles/2017-03-06/china-s-hidden-risks-rise “They're trying to establish a market in credit-default swaps, to better price and manage credit risk. They're imposing some mild new restrictions on WMPs [wealth-management products: short-term, high-yielding investments that are issued by banks. The market for such products is now worth close to $4 trillion, or nearly 40 percent of China's gross domestic product. Banks are heavily reliant on them for liquidity, and investors have come to view them as more or less risk-free, thanks to previous government bailouts], meant to rein in new issuance. Officially, even corporate defaults are up, suggesting that the government is finally getting serious about imposing losses on investors.”
- Business Giants to Announce Creation of a Computing System Based on Ethereum https://www.nytimes.com/2017/02/27/...ereum-alliance-business-banking-security.html and The Newest Bank Blockchain: Will This Be the Breakthrough? (Alliance of banks, tech giants a sign that race to build out technology is heating up again) https://www.wsj.com/articles/the-newest-bank-blockchain-will-this-be-the-breakthrough-1488285211 … But per http://trtl.bz/2mNK2Nh “It’s not a revolution. It’s a systems upgrade at best, and at worst a downgrade into a less efficient system which heightens cartelisation forces and introduces all sorts of new collective action and group-think problems to banking and risk management.”
- A beginner’s guide to Ethereum https://blog.coinbase.com/a-beginners-guide-to-ethereum-46dd486ceecf#.3izjidtar
- Cybersecurity Insurance: Smart Investment? http://www.securitymagazine.com/articles/87862 The Hiscox Cyber Readiness Report 2017 is here http://trtl.bz/2lwOyjb
- Digital Due Diligence: Four Questions to Evaluate Cyber Insurance Coverage http://www.rmmagazine.com/2017/03/01/digital-due-diligence/
- The Insurance Implications of Blockchain http://www.rmmagazine.com/2017/03/01/the-insurance-implications-of-blockchain/
- ILS [insurance-linked securities] can add loss-absorbing capacity for cyber risks: Swiss Re http://www.artemis.bm/blog/2017/03/01/ils-can-add-loss-absorbing-capacity-for-cyber-risks-swiss-re/
- Drones: I Have Seen the Future, and It Works! http://www.air-worldwide.com/Blog/Drones--I-Have-Seen-the-Future,-and-It-Works!/
- PRMIA’s Feb Issue of Intelligent Risk http://trtl.bz/prmia-intelligent-risk-feb-2017
- Are Risk Managers Ready for Artificial Intelligence? By GARP (Surveys and interviews indicate widespread understanding of AI technology’s foundational significance, yet few use it or appreciate the risks of adoption or non-adoption) http://trtl.bz/2mf7qBU
- How a $26 Billion Hedge Fund Lures the Beautiful Minds https://www.bloomberg.com/news/arti...igma-chasing-quants-in-campus-recruiting-push "“We need strong, analytical thinkers who can work through big, complex data sets,” Justin Pinchback, head of talent strategy at Chicago-based Citadel, said in an interview during the MIT datathon"
- AI Scientists Gather to Plot Doomsday Scenarios (and Solutions) https://www.bloomberg.com/news/arti...ther-to-plot-doomsday-scenarios-and-solutions
- The 10 Most Innovative Companies In Finance 2017 https://www.fastcompany.com/3067885...-10-most-innovative-companies-in-finance-2017
- I’m Renting a Dog? (Can purebreds on leases democratize credit? The Nevadan behind Wags Lending thinks so) https://www.bloomberg.com/news/features/2017-03-01/i-m-renting-a-dog
- US GAAP Financial Accounting Standards (FR Y9-C) and impact on Stress Testing Regulatory Reporting (CCAR/ FR Y14 Series Reports) https://www.linkedin.com/pulse/us-gaap-financial-accounting-standards-fr-y9-c-impact-roberto-robles
- Yahoo’s Breach Leads to Governance Precedents http://blogs.wsj.com/riskandcomplia...yahoos-breach-leads-to-governance-precedents/ “Yahoo’s board disclosed a series of measures it is implementing to address the flaws in procedures that came to light after the investigation. They aim to ensure that cybersecurity incidents are escalated to senior executives and the board in a timely manner, and that incidents are investigated rigorously.”
- The embarrassing reason behind Amazon’s huge cloud computing outage this week http://trtl.bz/2lP2Gze “With a few mistaken keystrokes, the employee wound up knocking out systems that supported other systems that help AWS work properly.” … and: Tech Chiefs Respond to AWS Outage http://blogs.wsj.com/cio/2017/02/28/tech-chiefs-respond-to-aws-outage/
- “Heist of the 21st Century” Highlights Risks in the Innovation Economy https://www.bloomberg.com/news/spon...rates-interconnected-risks-in-the-innovation/
- Global risk management survey, 10th edition (Deloitte) https://dupress.deloitte.com/dup-us-en/topics/risk-management/global-risk-management-survey.html Here is the survey http://trtl.bz/DUP-global-rm-10th
- Assessing Risk Tolerance https://peterlazaroff.com/2017/02/27/assessing-risk-tolerance/
- Perfect diversification means no asset can be dropped from (rather than added to) a portfolio https://letyourmoneygrow.com/2017/02/26/perfect-portfolio-diversification/
- Top 15 Financial Functions in Excel http://www.wallstreetmojo.com/financial-functions-in-excel/
- New Public Disclosures Shed Light on Central Counterparties (e.g., How the Typical Central Counterparty Default Waterfall Works) https://www.financialresearch.gov/v...losuers-shed-light-on-central-counterparties/ Some good explanation in here!
- In Snap’s I.P.O., Evidence of Bankers’ Strategy https://www.nytimes.com/2017/03/01/business/dealbook/in-snaps-ipo-evidence-of-bankers-strategy.html but it's non-trivial to short SNAP: So, You Want to Short Shares of Snap (It’s going to be costly to load up on bearish bets against Snap in the days ahead) http://blogs.wsj.com/moneybeat/2017/03/03/so-you-want-to-short-shares-of-snap/ "Short sellers borrow shares from other investors and sell them in the hope of buying them back lower at a discount. Ihor Dusaniwsky ... expects that 10% to 20% of the initial offering will be shorted in Snap’s first week of trading. He also estimates that the annualized interest rate that prospective shorts must pay to borrow shares will start at around 25%."
- Is Short Selling Stocks Worth It? By Visual Capitalist http://www.visualcapitalist.com/short-selling-stocks-worth/
- Longevity risk: Making money last as long as you do http://retirementrevised.com/longevity-risk-making-money-last-as-long-as-you-do/
- Canadian pensions overestimating longevity exposure: Club Vita http://www.artemis.bm/blog/2017/02/28/canadian-pensions-overestimating-longevity-exposure-club-vita/ Recall that Hull’s 3.4 is about longevity risk versus mortality risk.
- Second-degree moral hazard (If a service provider knows someone else is paying your bills, he is more likely to rip you off) http://trtl.bz/2lUnDd8
- Back to backwardation for crude? http://www.rcmalternatives.com/2017/02/back-to-backwardation-for-crude/ Super contango? “But while all these bets are piling up and Oil essentially goes nowhere, there’s another dynamic playing out worth watching. That’s the recent move of Oil into a slight backwardation, after years of Oil being in Contango (and even Super Contango, whatever that means, as dubbed by some reporters).”
- 2016 U.S. catastrophe frequency the highest since 1980: PCS http://www.artemis.bm/blog/2017/03/01/2016-u-s-catastrophe-frequency-the-highest-since-1980-pcs/
- Ratings Reform: Blasting the Business Model (The current credit rating system is biased and broken – and regulation hasn’t helped. Let’s fix this problem by eliminating the issuer-pay conflict of interest inherent in ratings) http://trtl.bz/2mYeIZ4
- I trained as a binary options salesman for a day. It wasn’t pretty http://www.timesofisrael.com/i-trained-as-a-binary-options-salesman-for-a-day-it-wasnt-pretty/
- Credit Default Swaps Need Fixing: Derivatives III http://seekingalpha.com/article/4049982-credit-default-swaps-need-fixing-derivatives-iii Kurt Dew also wrote this interesting two-part article: The Twisted OTC Derivatives Markets: Interest Rate Swaps http://trtl.bz/kurt-dew-irs-1 and http://trtl.bz/kurt-dew-irs-2
- Inside Harvard’s Radical Plan to Reverse a Decade of Poor Returns https://www.wsj.com/articles/inside...o-reverse-a-decade-of-poor-returns-1488277804 “In the past, Harvard Management Co. had staffers specialize in different areas, like real estate. Now, Harvard will use a generalist approach where staffers look across the entire portfolio to make investment decisions … Harvard will also invest by focusing on the types of risks that different investments present instead of earmarking specific allocations to asset classes.”
- Buffett Asks Big Money: Why Pay High Fees? https://www.nytimes.com/2017/02/27/business/dealbook/buffett-asks-big-money-why-pay-high-fees.html “My calculation, admittedly very rough, is that the search by the elite for superior investment advice has caused it, in aggregate, to waste more than $100 billion over the past decade … The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”
- Factoring in fixed income https://www.blackrockblog.com/2017/03/02/factoring-in-fixed-income/
- Paul Tudor Jones’ New Hedge Fund Pitch: Low, Low Prices https://www.wsj.com/articles/paul-tudor-jones-new-hedge-fund-pitch-low-low-prices-1488214739 “Tudor responded by recently informing clients that it would now be charging as low as a 1.75% management fee and 20% of any profits, the people said. Those are down from 2.75% and 27% at the start of 2016.”
- Factor Zoo or Unicorn Ranch? http://www.dualmomentum.net/2017/02/factor-zoo-or-unicorn-ranch.html
- Jim Epstein on Bitcoin, the Blockchain, and Freedom in Latin America (EconTalk with Russ Roberts) http://www.econtalk.org/archives/2017/02/jim_epstein_on.html "what's really driving [the ascendance of bitcoin] in Venezuela and causing such a rapid increase in uptake is that electricity in Venezuela is virtually free ..."
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