Blog Week in Risk (ending October 8th)

[David Harper CFA FRM]

New practice questions

• P1.T3.731. Lookback and Asian (exotic) options (Hull Chapter 26 cont.) http://trtl.bz/2yAbxQt
• P1.T3.732. Exchange option, volatility swap, and static option replication (Hull Ch. 26 continued) http://trtl.bz/2y4TTkN
• P2.T8.711. Time- versus dollar-weighted returns, M-squared measure, and performance attribution http://trtl.bz/2wHHSAd
• P2.T8.712. Hedge fund performance http://trtl.bz/2y3HyQg

In the forum this week (selected only)

• [P1.T2] What is a positive semi-definite matrix? https://forum.bionicturtle.com/thre...mi-definite-matrix-r16-p1-t2-hull_ch11.10754/
• [P1.T3] Thank you @akcfa447 for identifying the logical error in my clearinghouse question https://forum.bionicturtle.com/threads/l1-t3-145-futures-clearinghouse-hull.4381/#post-52626
• [P1.T3] Thank you @akcfa447 AGAIN for a super-logical correction of this old question that survived scrutiny until now https://forum.bionicturtle.com/threads/l1-t3-138-forward-hedges-hull.4353/#post-52620
• [P1.T3] What are the debit and credit entries for loan loss allowance/provisions https://forum.bionicturtle.com/thre...ctions-and-definitions-hull.10242/#post-52622
• [P1.T3] What is the difference between the discount rate and growth rate in the commodities futures contract? https://forum.bionicturtle.com/threads/discount-rate-and-growth-rate-in-commodities-futures.10762/
• [P1.T3] Derivation of “tailing the hedge” version of the optimal hedge ratio https://forum.bionicturtle.com/thre...ures-contracts-to-hedge-hull.4442/#post-52642
• [P1.T4] Understanding the Eurodollar futures contract price formula https://forum.bionicturtle.com/threads/eurodollar-futures.967/
• [P1.T4] More on the counter-intuitive rare case of positive option theta https://forum.bionicturtle.com/threads/theta-of-itm-put-option.10665/
• [P2.T6] How does the institution’s own credit quality impact its BCVA (always challenging and counterintuitive) https://forum.bionicturtle.com/thre...credit-value-adjustment-cva.10146/#post-52538
• [P2.T7] Why doesn’t the first bucket in the Basel’s SMA contain a loss multiplier? https://forum.bionicturtle.com/threads/bi-component-basel-committee.10763/
• [P2.T7] What do we mean by “loss events are highly dependent in a catastrophe?” I would invert this and DEFINE a catastrophe as a surge to highly dependent extreme tail loss events! https://forum.bionicturtle.com/threads/p1-t3-703-insurance-company-ratios-hull.10267/
• [P2.T8] Why Bodie’s market timing measure is more robust than the alternative (this comes up every year) https://forum.bionicturtle.com/threads/p2-t8-712-hedge-fund-performance.10758/#post-52614

Bank and banking

• Special Investigation: How America’s Biggest Bank Paid Its Fine for the 2008 Mortgage Crisis--With Phony Mortgages! https://www.thenation.com/article/h...he-2008-mortgage-crisis-with-phony-mortgages/
• After Uber and Wells Fargo, Boards Wake Up to Company Culture https://www.wsj.com/articles/after-uber-boards-wake-up-to-company-culture-1507046401
• How UBS Became Home to Half the World’s Billionaires https://www.bloomberg.com/features/2017-ubs-sergio-ermotti-interview/
• Did you know that BIS has a monthly newsletter? (I myself did not know until now!) https://www.bis.org/press/newsletter.htm

Technology, including FinTech and Cybersecurity

• Blockchain: From Theoretical to Authenticated by XL Catlin http://xlcatlin.com/fast-fast-forward/articles/blockchain-from-theoretical-to-authenticated
• What’s an Initial Coin Offering? ICOs Explained in 11 Questions https://www.wsj.com/articles/whats-...ing-icos-explained-in-11-questions-1506936601
• Goldman Sachs Explores a New World: Trading Bitcoin https://www.wsj.com/articles/goldman-sachs-explores-a-new-world-trading-bitcoin-1506959128

Data science (primarily R), including Alternative Data

• Machine Learning for Investors: A Primer https://alphaarchitect.com/2017/09/27/machine-learning-investors-primer/

Personal finance

• Seven factors that determine your mortgage interest rate https://www.consumerfinance.gov/about-us/blog/7-factors-determine-your-mortgage-interest-rate/

Case Studies and Companies, including Strategic or Reputation risk

• [Equifax] A Warning Shot on Equifax: Index Provider Flagged Security Issues Last Year https://www.wsj.com/articles/a-warn...-flagged-security-issues-last-year-1507292590
• [Equifax] A First Look at the Equifax Cyber Loss http://www.iii.org/insuranceindustryblog/?p=5476
• [Equifax] Six Fresh Horrors from the Equifax CEO’s Congressional Hearing https://www.wired.com/story/equifax-ceo-congress-testimony
• [Equifax] Equifax auditors are on the hook for data security risk controls http://www.marketwatch.com/story/eq...ok-for-data-security-risk-controls-2017-10-02
• [Yahoo] All 3 Billion Yahoo Accounts Were Affected by 2013 Attack https://www.nytimes.com/2017/10/03/technology/yahoo-hack-3-billion-users.html
• [Yahoo] Yahoo Triples Estimate of Breached Accounts to 3 Billion https://www.wsj.com/articles/yahoo-triples-estimate-of-breached-accounts-to-3-billion-1507062804

Risk Foundations, including Case Studies (FRM P1.T1)

• Black Monday: 30 Years After https://www.moneyandbanking.com/commentary/2017/10/1/black-monday-30-years-after References a Bruce Tuckman white paper
• 10 Years after Northern Rock http://ritholtz.com/2017/10/10-years-northern-rock/
• Flashcards to Learn 168 Cognitive Biases https://medium.com/tradecraft-traction/flashcards-to-learn-168-cognitive-biases-4c37f3418f15

Quantitative Analysis (FRM P1.T2)

• When Does Volatility Equal Risk? https://blogs.cfainstitute.org/investor/2017/10/05/when-does-volatility-equal-risk/
• Dispelling a Myth About Stock Market Volatility by Aaron Brown https://www.bloomberg.com/view/articles/2017-10-02/dispelling-a-myth-about-stock-market-volatility
• Redefine statistical significance (via CFA Institute) https://www.nature.com/articles/s41562-017-0189-z.epdf
• Teach Yourself Logic 2017: A Study Guide (via CFA Institute) http://www.logicmatters.net/resources/pdfs/TeachYourselfLogic2017.pdf
• Time Series Analysis in R Part 3: Getting Data from Quandl https://datascienceplus.com/time-series-analysis-in-r-part-3-getting-data-from-quandl/
• Create and interpret a weighted histogram https://blogs.sas.com/content/iml/2017/10/04/create-interpret-weighted-histogram.html

Financial Markets and Products, including Interest Rates, Commodity Risk, and Foreign Exchange (FX)(FRM P1.T3)

• “This is a story about Trade. We're building a commodity exchange in Ghana, and we've started with trading maize. In our first ten months of operation, we've traded over $1.2M worth of goods.” http://www.tradeghana.co/story
• What a New Conduct Code Means for FX http://www.cfapubs.org/doi/full/10.2469/cfm.v28.n3.9
• Oil Market Shifts From Contango to Backwardation: Implications for Investors https://blog.pimco.com/en/2017/10/o...o-to-backwardation-implications-for-investors
• My Take on Inflation (by Neel Kashkari, President of Minneapolis Fed) https://medium.com/@neelkashkari/my-take-on-inflation-578aa5b6dc14

Credit risk (FRM P1.T6)

• [GARP] Credit Cycles and CECL Implications (Expected-credit-loss calculations must take potential downturns into account) http://trtl.bz/2xslVtu
• Everybody Wants Duration Even as Fed Normalization Draws Near https://www.bloomberg.com/news/arti...duration-even-as-fed-normalization-draws-near

Operational risk, including Legal risk (FRM P1.T7)

• 8 Legal Developments You Need to Know About http://www.riskmanagementmonitor.com/8-legal-developments-you-need-to-know-about/

Investment risk, including Pensions (FRM P1.T8)

• The Shallow Benefit of Deep Liquidity http://www.collaborativefund.com/blog/the-shallow-benefit-of-deep-liquidity/