FRM exam (selected subset only from a busy week leading up to the exam)
- More helpful study tips shared by members https://forum.bionicturtle.com/threads/study-plan-guide.8670/page-2#post-45853
- Regression assumptions (P1.T1): Does the Classical Linear Regression Model (CLRM) require normal errors? If not, what does it assume about the errors and what is the payoff of the assumption? https://forum.bionicturtle.com/threads/p1-t2-407-univariate-linear-regression.7972/
- Credit events (P1.T1): How do we classify a credit rating downgrade? ie, is it a credit risk, credit event? https://forum.bionicturtle.com/threads/p1-t1-604-credit-risk-topic-review.9708/#post-45919
- Distributional quanitle (P1.T2): Finding the quantile given the CDF F(x) https://forum.bionicturtle.com/threads/p1-t2-300-probability-functions-miller.6728/page-3#post-45807
- Regression df (P1.T2): How many degrees of freedom (df) in a multivariate regression? https://forum.bionicturtle.com/threads/l1-t2-85-sample-regression-function-srf.3848/#post-45839 This comes up every year. For t test of slope coefficient, df equals (n - number of estimated coefficients including the intercept). For example, in y(i) = a(0) + β(1)*X(1i) + β(2)*X(2i) +e(i), there are three coefficients: two slopes and one intercept. This is also the total number of variables, including the dependent. So df = n -3.
- Regression multicollinearity (P1.T2) Classic exam question gives the tell-tale signs of multicollinearity https://forum.bionicturtle.com/threads/f-statistic-and-t-statistics.9950/
- Mortgage (P1.T3): Question: After five years (60 months), which is nearest to the outstanding scheduled principal balance on a 30-year fixed rate mortgage (FRM) with an original balance of $200,000 and a mortgage interest rate of 3.60%? https://forum.bionicturtle.com/thre...tgage-products-tuckman.8474/page-2#post-45843 Sometimes it’s better to just think about the question rather than trying to memorize a complicated formula, notice how much easier is Deepak’s solution!
- Bond basics (P1.T3): Applying the law of one price to a bond pricing problem https://forum.bionicturtle.com/threads/fmp.9114/
- Swap mechanics (P1.T3): What is the impact of a compound swap on credit exposure? https://forum.bionicturtle.com/threads/p1-t3-209-hulls-swaps-ii-topic-review.6073/#post-45932
- Commodity cost of carry (P1.T3): How do the commodity’s cost of carry factors (risk-free rate, storage, and convenience) impact the timing decision to deliver? https://forum.bionicturtle.com/thre...tures-prices-ii-topic-review.6033/#post-45914
- Option Greeks (P1.T4): A difficult greek neutralization problem explained https://forum.bionicturtle.com/threads/p1-t4-204-option-greeks-topic-review.6223/#post-45970
- Extreme value theory (P2.T5): @jshall very helpfully summarizes a key trade-off between block maxima and peaks over threshold (POT) in extreme value theory (EVT) https://forum.bionicturtle.com/threads/p2-t5-213-extreme-value-theory-evt-topic-review.6125/
- Interest rate models (P2.T5): The (dw) term in Tuckman’s interest rate models is already time scaled https://forum.bionicturtle.com/threads/tuckman-model-2-simulation.9967/
- Implied probability of default (P2.T6): How the implied probability of default (in Saunders) can differ depending on the recovery assumption https://forum.bionicturtle.com/thre...-probability-pd-topic-review.6234/#post-45885
- Credit value at risk (P2.T6): How does confidence level determines number of defaults in credit VaR? https://forum.bionicturtle.com/threads/p2-t6-213-credit-value-at-risk-cvar-topic-review.6333/
- Interest rate swap expsoure (P2.T6): Gregroy shows that a vanilla swap’s maximum exposure occurs at T/3 https://forum.bionicturtle.com/thre...ure-terminology-topic-review.6191/#post-45795
- Bank balance sheet (P2.T7): Explicating the impact of leverage on return on equity (ROE) per Malz https://forum.bionicturtle.com/threads/p2-t7-509-collateral-markets-malz.8366/
- Liquidity risk (P2.T7): How many variations of liquidity cost (LC) are there, that we care about? https://forum.bionicturtle.com/thre...of-liquidity-vs-dowds-cost-of-liquidity.9966/
- Liquidity at risk, LaR (P2.T7): When is liquidity at risk (LaR) greater or less than value at risk (VaR)? https://forum.bionicturtle.com/threads/lar-vs-var-lar-or-var-k-dowd.9971/
- 2016 P2.5: Why the credit spread approximation, s=λ*LGD, doesn’t work for a credit default swap (CDS) https://forum.bionicturtle.com/threads/2016-garp-pq-question-5-cds-garp16-p2-5.9892/
- 2016 P2.33: The hazard rate is conditional probability not a joint probability https://forum.bionicturtle.com/threads/hazard-rate-garp16-p2-33.9972/ More detailed explanation is here http://trtl.bz/garp16-p2-33 (paid only)
- 2016 P1.55: Achieving a negative duration position https://forum.bionicturtle.com/threads/securities-with-negative-duration-garp16-p1-55.9969/
- 2016 P2.72: Grinold’s scaled alpha; ie, I would not worry about this implementation, frankly https://forum.bionicturtle.com/thre...-information-ratio-formula-garp16-p2-72.1933/
- The problem with low interest rates http://monevator.com/the-problem-with-low-interest-rates/ A good list, from “1. Savers are not rewarded” to “10. Makes it hard to value other assets.”
- Myth 4.5: DCFs break down with near-zero risk free rates! http://aswathdamodaran.blogspot.com/2016/11/myth-45-dcfs-break-down-with-near-zero.html
- Negative interest rates: absolutely everything you need to know https://www.weforum.org/agenda/2016...-rates-absolutely-everything-you-need-to-know
- Hyperliquidity: A Gathering Storm for Commodity Traders https://www.bcgperspectives.com/content/articles/energy-environment-metals-mining-hyperliquidity/ “Hyperliquid markets have several defining traits:
- Information is highly standardized and accessible, and trading is governed by relatively few standards. Market activity is handled almost entirely through an electronic platform (one that handles mainly exchange-traded futures or very liquid, platform-traded, over-the-counter contracts) and underpinned by an efficient infrastructure based on algorithmic trading. Decision making is increasingly controlled by algorithms fed by automated data; human intervention is limited. The bid-ask spread is tiny, typically just 1 to 3 basis points. Buyers or sellers who come in with a large order, however, may not be able to secure such a bid-ask spread: competitors’ trading algorithms might detect the position and take steps to exploit it. For market participants, this places a premium on smarter trade-order management. Control over a commodity’s traded volume is held not only by industrial commodity players and merchant traders but also more and more by hedge funds and a variety of proprietary traders and market makers that possess algorithm-based trading capabilities. Trading strategies are increasingly based on speed, execution, and cross-asset trading. These strategies include automatic arbitrage, high-frequency trading, and cross-asset (for example, gas-to-oil) arbitrage.”
- Hedge Fund Clients Dump Humans for Computers and Still Lose http://www.bloomberg.com/news/artic...tors-dump-humans-for-computers-and-still-lose “Funds that use mathematical models have raised $21 billion this year, according to data provider eVestment, while the rest of the industry suffered $60 billion of withdrawals.”
- Banks No Longer Make the Bulk of U.S. Mortgages (Taking their place are nonbank lenders more willing to make riskier loans banks now shun) http://www.wsj.com/articles/banks-no-longer-make-the-bulk-of-u-s-mortgages-1478079004
- Some good news about U.S. sovereign debt (BlackRock Sovereign Risk Index, BSRI) https://www.blackrockblog.com/2016/11/01/good-news-us-sovereign-debt/
- What Is ‘Illiquidity Premium’? (Investors can find higher yields by investing in bonds that are lightly traded) http://www.wsj.com/articles/what-is-illiquidity-premium-1478487601
- Adding it all up: the macroeconomic impact of Basel III and outstanding reform issues http://www.bis.org/publ/work591.htm The FRM refers to this as endogenous liquidity risk “The illiquidity premium exists because when markets are illiquid, the purchase or sale of a security, even in small quantities, can move prices substantially.”
- Seven key trends in corporate carbon pricing http://trtl.bz/2eRXS9W
- Global Inflation-Linked Bonds: A Primer https://blogs.cfainstitute.org/investor/2016/11/04/global-inflation-linked-bonds-a-primer/
- Fintech in Capital Markets: A Land of Opportunity https://www.bcgperspectives.com/con...echnology-digital-fintech-in-capital-markets/ Report is here http://trtl.bz/2fPMrnY
- Introducing The World FinTech Report 2017 https://www.capgemini.com/the-world-fintech-report-2017 Copy of report here http://trtl.bz/2egUN6Y
