Blog Week in Risk (November 25th)

[David Harper CFA FRM]

New YouTube

• Historical simulation (HS VaR): Basic and age-weighted (FRM T4-2) https://trtl.bz/2BvXICX
• Exotic options: Barrier options (FRM T3-42) https://trtl.bz/2QhrTWr

In the forum

• [FRM exam] Our feedback threads continue to be very active: Part 1 is here https://trtl.bz/2KfIlRM and Part 2 is here https://trtl.bz/2DMDhnx
• [P1.T2] How exactly is learning calculus integration helpful for the exam? https://forum.bionicturtle.com/threads/calculus-integration.22012/
• [P1.T2] Is the inclusion/exclusion of correlation/covariance inconsistent when scaling value at risk (VaR)? https://trtl.bz/2FvWj2W
• [P1.T3] When valuing an interest rate swap (IRS) as two bonds, why does the floater price to par? https://trtl.bz/2FPRGRs
• [P1.T3] Structured portfolio https://forum.bionicturtle.com/threads/creating-a-structured-product.22014/
• [P2.T5] Can we backtest VaR when assuming a non-normal distribution? https://trtl.bz/2FDksFa
• [P2.T5] Convexity and volatility https://forum.bionicturtle.com/threads/convexity-and-volatility.22013/

External

Risk

• Risk Reduction: A response strategy for decreasing the impact of potential risk events https://www.erminsightsbycarol.com/risk-reduction/
• Why “Many-Model Thinkers” Make Better Decisions https://hbr.org/2018/11/why-many-model-thinkers-make-better-decisions
• Measuring uncertainty helps investors navigate risk (Researchers are developing new ways to gauge volatility far beyond financial markets) http://review.chicagobooth.edu/econ...ing-uncertainty-helps-investors-navigate-risk
• Catastrophe Bonds: A Primer https://conversableeconomist.blogspot.com/2018/11/catastrophe-bonds-primer.html
• The advanced-analytics solution for monitoring conduct risk (McKinsey) https://trtl.bz/2r5VJzd
• You Snooze, You Lose: Insurers Make The Old Adage Literally True https://trtl.bz/2FIwL2Z

Banking (and cryptocurrency)

• FSB publishes recommendations on compensation data reporting to address potential misconduct risk https://trtl.bz/2r7oP0M
• FSB report finds that effects of G20 financial reforms on infrastructure finance are of a second order relative to other factors https://trtl.bz/2r7oScY
• Sweden’s Push to Get Rid of Cash Has Some Saying, ‘Not So Fast’ (Cash is disappearing in the country faster than anyone thought it would. Now, officials are trying to slow its demise as they determine the societal costs) https://www.nytimes.com/2018/11/21/business/sweden-cashless-society.html
• The Neo-Banks Are Finally Having Their Moment https://www.nytimes.com/2018/11/20/technology/finance-start-ups-neo-banks.html
• The seven deadly paradoxes of cryptocurrency https://bankunderground.co.uk/2018/11/13/the-seven-deadly-paradoxes-of-cryptocurrency/

Climate

• Fourth National Climate Assessment (Volume II): Impacts, Risks, and Adaptation in the United States https://nca2018.globalchange.gov/ WaPo article on same (Major Trump administration climate report says damage is intensifying across the country) https://trtl.bz/2FGjYhp; NYT article on same https://trtl.bz/2reIDjf
• How Wildfires Are Making Some California Homes Uninsurable https://www.nytimes.com/2018/11/20/business/california-fires-insurance.html
• How Extreme Weather Is Shrinking the Planet https://www.newyorker.com/magazine/2018/11/26/how-extreme-weather-is-shrinking-the-planet
• How Climate Change Will Cause More Simultaneous Disasters https://www.nytimes.com/2018/11/19/climate/climate-disasters.html
• A Warming Climate Brings New Crops to Frigid Zones (WSJ's Price of Climate Series) https://www.wsj.com/articles/a-warming-climate-brings-new-crops-to-frigid-zones-1543168786

Governance

• The Role of the Lead Independent Director https://corpgov.law.harvard.edu/2018/11/25/the-role-of-the-lead-independent-director/
• Internal audit needs to perform in a way that matters to the board and top management https://trtl.bz/2r7Axc4 Norman Marks' book, Auditing That Matters https://amzn.to/2PTzv21

Cyber

• Cyber risk measurement and the holistic cybersecurity approach (McKinsey) https://trtl.bz/2FEOpEQ
• Who takes cyber risk? https://normanmarks.wordpress.com/2018/11/17/who-takes-cyber-risk/

Quant

• Bayesian Musings from a Non-Statistician https://trtl.bz/2FtgSNH
• The Poisson Distribution https://towardsdatascience.com/the-poisson-distribution-103abfddc312

Investing

• Surveying the Damage in Stocks https://awealthofcommonsense.com/2018/11/surveying-the-damage-in-stocks/
• Global trends in interest rates https://voxeu.org/article/global-trends-interest-rates
• The Poker Aces Playing a Key Hand in the $5 Trillion ETF Market https://trtl.bz/2FRwAT8
• Individual Investors Buy Busted Mortgages (WSJ) https://trtl.bz/2FF2kL1