Blog Week in Risk (January 6th)

[David Harper CFA FRM]

New YouTube

• Introduction to binomial option pricing model: two-step (FRM T4-6) https://trtl.bz/2F2jn8B
• Exotic options: Asian option (FRM T3-46) https://trtl.bz/2R9UmyI

New Practice Questions

• P1.T4.900. Discount function and the Law of One Price (Tuckman, Ch.1) https://trtl.bz/2EWcHbo
• P2.T9.900. Cyber Risk, Market Failures, and Financial Stability (Part 1 of 2) https://trtl.bz/2F7qcEW

In the forum

• [BT FRM] Our 2019 FRM Publishing Process https://trtl.bz/2FUOSCK
• [FRM exam] To what degree should an FRM candidate adhere to the literal format of the Learning Objectives (LOs)? https://trtl.bz/2EWdWHA
• [P1.T2] It is good to know that SER = SQRT(RSS/df) https://trtl.bz/2EYa1dd
• [P1.T3*] What are the advantage(s) of a covered call? https://trtl.bz/2F049Aj
• [P1.T3*] How does the auctioning process work for a CCP after one of the member defaults? https://trtl.bz/2F2HDH5
• [P1.T4] Why doesn't effective convexity have a parallel structure to effective duration? https://trtl.bz/2EZecGn
• [P1.T4] Can we calculation the bond price directly from par/swap rates? https://trtl.bz/2EXzFyJ
• [P1.T4] Sorting out when the option Greek is negative or positive https://trtl.bz/2EZ1Q0j
• [P1.T4] A delightfully informative idea in Tuckman is that a parallel shift implies single-factor but single-factor does not imply parallel shift https://trtl.bz/2F4eB9Q
• [P1.T4] In some cases is not expected loss a risk? https://trtl.bz/2FcJzxf
• [P2.T5] More discussion on the Black-Scholes option pricing model and implied volatility https://trtl.bz/2F2geVk
• [P2.T5] There are simple, special cases of the formula for modified duration when the bond is either zero-coupon or priced-at-par https://trtl.bz/2EWv53P
• [P2.T5] Which convexity formulas does an FRM candidate need to know, if any? https://trtl.bz/2ArqUtA
• [P2.T5] Counterintuitive math in Dowd's correlation-weighted historical simulation https://trtl.bz/2FbUHe0
• [P2.T6] The Merton model for credit risk only appears to have different versions https://trtl.bz/2F0UaeR
• [P2.T6] Where does the exam cover portfolio unexpected loss (UL) and risk contribution (RC)? https://trtl.bz/2F0UCtz
• [P2.T6] What is the impact of funding cost on the CDS basis? https://trtl.bz/2F1tppQ
• [P2.T6*] Why does Gregory say that the more senior a tranche, the more counterparty risk it creates? https://trtl.bz/2F4t59O
• [P2.T8] How to interpret Ang's statement: rebalancing as a portfolio strategy is also a short volatility strategy which produces a long run volatility risk premium https://forum.bionicturtle.com/threads/volatility-risk-premium.22063/

External

Risk

• Transforming risk management in 2019 and beyond (Norman Marks) https://trtl.bz/2FamSsW
• Global Claims Review 2018 (Allianz) https://trtl.bz/2Emq0l8
• Top 19 Risk Management Resources for 2019 (by Carol Williams) https://www.erminsightsbycarol.com/19-risk-management-resources-2019/
• The New Age of Risk Management Strategy for Business (new Lynda.com course) https://trtl.bz/2FeU5Dn

Regulatory

• Perspectives on CCAR: Preparing for 2019 amid expectations of regulatory relief https://trtl.bz/2Fc2mIn
• The Basel framework in 100 jurisdictions: implementation status and proportionality practices https://www.bis.org/fsi/publ/insights11.htm

Cyber

• Here’s what to expect in cybersecurity in 2019 https://techcrunch.com/2018/12/31/cybersecurity-predictions-2019/
• The Future of Cybersecurity: A 2019 Outlook https://trtl.bz/2FaMZAP
• Fighting back against synthetic identity fraud https://trtl.bz/2FbQru0 "By our [McKinsey's] estimates, synthetic ID fraud is the fastest-growing type of financial crime in the United States, accounting for 10 to 15 percent of charge-offs in a typical unsecured lending portfolio."
• [GARP] Directors Come to Grips with Digital Transformation (NACD and EY-IIF reports track cyber and other board-level priorities; Protiviti-N.C. State finds greater desire to invest in risk management) https://trtl.bz/2FaHBNe

Governance

• 2019 Global & Regional Trends in Corporate Governance https://trtl.bz/2FdWor6
• NACD Public Company Governance Survey https://corpgov.law.harvard.edu/2019/01/06/nacd-public-company-governance-survey/ "Directors report that changes in the regulatory climate, the prospect of an economic slowdown, growing cybersecurity threats, business-model disruptions, and worsening geopolitical volatility will most significantly impact their organizations in 2019. These often interconnected risks have increased business uncertainty as management finds their likelihood difficult to anticipate and their impacts difficult to mitigate."

Quant

• Comparing Machine Learning Models: Statistical vs. Practical Significance https://trtl.bz/2F9ZJHL
• Bayes’ Theorem: The Holy Grail of Data Science https://trtl.bz/2FagnqX
• Causal Inference Book https://www.hsph.harvard.edu/miguel-hernan/causal-inference-book/
• Logic Theory — Truth Tables (Part III — Intro to the Interdisciplinary Logic Tool) https://trtl.bz/2FeAFzs
• Dice, Polls & Dirichlet Multinomials (A few applications of Bayesian Statistics using probabilistic programming) https://trtl.bz/2F8ph8p

Investing

• January 2019 Data Update 1: A reminder that equities are risky, in case you forgot! (Aswath Damodaran) https://trtl.bz/2Fggccz
• Three Theories on the FX Flash Crash: Robots, Apple, Yen Shorts https://trtl.bz/2Fc3R9A

Other

• 2019 and the year ahead! https://trtl.bz/2Fbw7tw Insuretech predictions and links.
• Why you should care about the Nate Silver vs. Nassim Taleb Twitter war https://trtl.bz/2F7S0de
• Longer-Term Outlook: 8 Forecasts For The Future https://trtl.bz/2FbzbWv
• Want excellent free coding tutorials? Subscribe to these YouTube channels. https://trtl.bz/2Fc4Qrc