Blog Week in risk (March 3rd)

[David Harper CFA FRM]

New Practice Questions

• P1.T4.908. Interest rate factors and the DV01-based hedge (Tuckman Ch.4) https://trtl.bz/2GYXTcU
• P2.T9.908. What is the Secured Overnight Financing Rate (SOFR)? https://trtl.bz/2BZ1lAZ

New YouTube

• Option delta plus gamma (FRM T4-16) https://trtl.bz/2Nww9xt
• Option vega (FRM T4-17) https://trtl.bz/2tGDQrQ
• R Programming: Introduction: List data structure (R Intro-02) https://trtl.bz/2TqN36g The 2nd video in my new playlist that introduces R (#rstats) programming!

In the Forum

• [P1.T1] How does value at risk (VaR) change if the assumption is changed from zero expected return to non-zero? https://trtl.bz/2TkfItu and basic VaR issues that every candidate needs to know https://trtl.bz/2IGWeLs
• [P1.T1] Percentage point versus percent, and why a good question does not make you memorize the difference https://trtl.bz/2To8S6a
• [P1.T1] Formula for minimum variance portfolio https://trtl.bz/2To7DE6
• [P1.T2] Be sure to understand the definition of the p-value https://trtl.bz/2TyxbyI
• [P1.T3] The bear spread with puts requires an initial payment, but the bear spread with calls receives a cash inflow (so what is the advantage of using puts?) https://trtl.bz/2IMBNgl
• [P1.T3] Hull's question 2.29 on margin call/withdrawal https://trtl.bz/2TicLtC
• [P1.T4] Understanding expected shortfall (ES) given a discrete distribution https://trtl.bz/2IHYVfL
• [P1.T4] Bootstrapping discount factors from the swap rate curve https://trtl.bz/2IKauU1
• [P2.T5] Dowd's derivation of the standard error of the quantile estimator https://trtl.bz/2IPSJlZ
• [P2.T6] Jon Gregory himself registered to comment in our forum (with respect to a question about the CDS-bond basis). Great to see you Jon! https://trtl.bz/2IRgBpm
• [P2.T6] Are there better references (than De Laurentis) for understanding Altman's Z as a type of linear discriminant? https://trtl.bz/2TbTFoU
• [P2.T6] The collateral and the haircut in a repo transaction cover different risks https://trtl.bz/2TkfORS
• [P2.T6] Understanding the relationship between standalone, incremental and marginal credit valuation adjustment (CVA) https://trtl.bz/2IDiBl6
• [P2.T6] Understanding the unusual shape of the exposure profile of a credit default swap (CDS)
• [P2.T6] Stulz's credit risk reading has a contradiction between theoretical model and empirical observation with respect to interest rate impacts https://trtl.bz/2TqTia0
• [P2.T6] CVA subtracts from the risk-free value https://trtl.bz/2Tjb0fF
• [P2.T7] How to tabulate (aka, convolute)per loss distribution approach (LDA) given severity and frequency distributions https://trtl.bz/2II0XfT
• [P2.T7] What is the IEA factor in calculation of Operational Risk ILDC component? https://trtl.bz/2ISCy7M

External

Banks and banking

• Global Trends in Interest Rates (NY Fed) https://trtl.bz/2TlEHN4
• The Problem for Small-Town Banks: People Want High-Tech Services (WSJ) https://trtl.bz/2IQfA0Z
• JPMorgan Fueled Two Financial Crises, Third Coming? https://trtl.bz/2Thh08v Notice he claims mistakenly that VaR assumes a normal distribution (I commented to correct him)
• Why the Life-Insurance Industry Wants to Creep on Your Instagram https://trtl.bz/2TgRiBb
• First Terror Bond Sale Opens New High-Yield Catastrophe Market https://trtl.bz/2ICC4Cf (Speaking of innovative catastrophe bonds) World Bank’s ‘pandemic bonds’ under scrutiny after failing to pay out on Ebola https://trtl.bz/2IIp1zn

Risk and regulators

• The ISO 31000 ERM Standard https://www.erminsightsbycarol.com/iso-31000-erm-standard/
• [BIS] Basel Committee discusses policy and supervisory initiatives and approves implementation reports https://www.bis.org/press/p190228.htm
• [BIS] Fintech developments in the insurance industry - Executive Summary https://www.bis.org/fsi/fsisummaries/fintech.htm
• Notepad: Risk in Review – March 2019 http://www.rmmagazine.com/2019/03/01/notepad-risk-in-review-march-2019/
• High Risk on the High Seas http://www.rmmagazine.com/2019/03/01/high-risk-on-the-high-seas/
• Federal Reserve May Add Bitcoin Crash to Stress Test Scenarios https://www.coindesk.com/federal-reserve-may-add-bitcoin-crash-to-stress-test-scenarios
• Banks Are Paying Peanuts on Deposits. Robo Advisers Are Offering Higher Rates https://trtl.bz/2IOHmef
• [FSB] CCP resilience, recovery and resolution: completing the journey towards resilient derivatives markets http://www.fsb.org/wp-content/uploads/S270219.pdf
• Demystifying the India Data Protection Bill, 2018: Part 3 of 3 https://trtl.bz/2ThDDd9
• Companies Give Investors a Peek at Life After Libor (WSJ) https://trtl.bz/2IZ9kEi
• Pedestrian Deaths Reach Highest Level in Nearly 30 Years (WSJ) https://trtl.bz/2INNmDT
• Rise of the Shadow ESG Regulators https://corpgov.law.harvard.edu/2019/03/02/rise-of-the-shadow-esg-regulators/

Governance

• How to Be a Good Board Member https://trtl.bz/2TizJRe (and) What Makes a Great Independent Board Member? https://trtl.bz/2TgDgQ2
• 2019 Proxy Season Preview https://corpgov.law.harvard.edu/2019/02/26/2019-proxy-season-preview/
• The Board and ESG https://corpgov.law.harvard.edu/2019/02/25/the-board-and-esg/
• Synthesizing the Messages from BlackRock, State Street, and T. Rowe Price https://trtl.bz/2TrC38t

Fintech and data science

• rstudio::conf 2019 Workshop materials now available https://blog.rstudio.com/2019/02/06/rstudio-conf-2019-workshops/ Materials for the conference I attended in January
• AI for Everyone: new course from deeplearning.ai now available on Coursera https://blog.coursera.org/ai-for-everyone-new-course-from-deeplearning-ai-now-available-on-coursera/
• [Announcement] Launching Analytics Vidhya Certified Programs and new Courses portal https://trtl.bz/2Tw0Vfi
• Coming Soon: Cyber Risk Factored into Business Credit Ratings https://trtl.bz/2IPJbHS
• The Cybersecurity 202: These are the four parts of the economy most vulnerable to cyberattack, according to Moody's (WP) https://trtl.bz/2IZ82sW
• Derisking machine learning and artificial intelligence https://trtl.bz/2Tbf5CG
• Financial Machine Learning Part 0: Bars https://trtl.bz/2ThBLkK
• Getting started with Git and GitHub: the complete beginner’s guide https://trtl.bz/2IZ8UOe A good way to start doing data science is to learn git and github

Quantitative

• A brief introduction to Markov chains https://trtl.bz/2TlDzZQ
• The Most Beautiful Theorem in Mathematics: Euler’s Identity https://trtl.bz/2TyYPvv
• A step by step explanation of Principal Component Analysis https://trtl.bz/2IQc7zv

Personal Finance

• Student Loan Debt Statistics in 2019: A $1.5 Trillion Crisis https://trtl.bz/2TgPzvH
• U.S. Credit Scoring Trends to Watch in 2019 https://www.fico.com/blogs/risk-compliance/u-s-credit-scoring-trends-to-watch-in-2019/
• Getting Into the 800 Credit Score Club Is Tough—Staying in Is Tougher https://trtl.bz/2TuBOd0
• 24 Lessons From Warren Buffett’s Annual Letters To Shareholders https://trtl.bz/2TxL4wK
• Aswath Damodaran (FRM author) on Acquisitions: Just Say No https://trtl.bz/2TuiZ9H
• The Controversy Around Stock Buybacks Explained https://www.visualcapitalist.com/stock-buybacks-explained/

ESG (Climate)

• A World Without Clouds (Quanta) https://trtl.bz/2Tlma3t This study garnered attention this week: Extreme CO2 levels could trigger clouds ‘tipping point’ and 8C of global warming https://trtl.bz/2TnoqHy Clouds May Hold the Key to Future Warming (Scientific American) https://trtl.bz/2IZFCi6
• Show Us Your Climate Risks, Investors Tell Companies https://trtl.bz/2TqVXR1
• Extreme Weather Can Feel ‘Normal’ After Just a Few Years, Study Finds https://www.nytimes.com/2019/02/26/climate/what-is-extreme-weather.html
• ESG Reporting Is Now a Competitive Differentiator for Technology Firms https://trtl.bz/2Tv4iDl
• Taking Action on Climate Change http://www.rmmagazine.com/2019/03/01/taking-action-on-climate-change/
• Ask Your Central Banker If Climate Change Is Hurting You https://trtl.bz/2ISvrfo "To the Fed, climate change is already manifest, and a risk. But it’s an operational risk, not a systemic one."

Other

• 10 Breakthrough Technologies 2019 by Bill Gates https://www.technologyreview.com/lists/technologies/2019/
• Microsoft Excel will now let you snap a picture of a spreadsheet and import it https://trtl.bz/2IQ0BUP
• Champion Focus in 30 Seconds https://trtl.bz/2ToUbjA Love this nine things technique!
• MMT for Dummies https://www.creditwritedowns.com/p/mmt-for-dummies Finally somebody explains MMT with clarity