Recent content by Abhinav Agrawal

ok, yes, dumb mistake :(

Digital CDS means the payoff is fixed irrespective of recovery. So the CDS buyer will take par amount on default and deliver underlying.

This one should be volatility weighting. It was mentioned in the text that if historical volatility was 4% and current volatility is say 2% then the historical moves will be multiplied by a factor 4%/2% = 2. Page 4 here: http://www.smartquant.com/references/VaR/var32.pdf

The first objective of bank will be to meet 8% capital, since there is no Tier2, entire common equity will be used there meaning not enough capital left for 2.5% common equity countercyclical buffer

There was one which compared the yield of mbs and treasury bond both without default risk, I marked the convexity option in the answer coz even though mbs might have higher yield it also has a call option.

I calculated prob of 8 exceptions and then found the z score from the table given, was getting around 2.7 something, not sure what is wrong with this approach

The catch was to take exposure as 0 where mtm was negative

That is correct, I used 3 defaults which is where I messedup. What about the backtesting question solution?

970 and 960 is value 1yr from now and 952.48 is the current value, how can we equate both without discounting with 1yr spot rate.

I couldn't solve the bond option, spent lot of time on it. For the CDS seller I marked the same.

I wasnt able to get the exact answers for below, any hints on how you solved them. back testing there are 8 exceptions in a 99% VAR model - ~3.47 Pool of 15 assets with no correlation - I think 83333 Option value of a bond(2nd Q) - 5.94

1. Portfolio of 100mn has volatility 30%, how much should we short an asset with volatility 20%. 2. A 2yr zero coupon bond is priced at 952.48, risk free rate is 1%. The price can be 970 or 950 after 1yr depending on how interest rate change. Use risk neutral probability of interest rate move...

In which of the below the assets remain on the balance sheet of the institution - CMO - CLO - MBS - Covered Bond Answer is covered bond Which of the below has minimum counterparty credit risk - Equity CDS - Total Return Swaps - Credit Linked Note Answer is credit linked note For stress...

For some of the questions, it was impossible to get the exact answer, also when GARP says what will be the closest value of so and so, really difficult to get the correct one. 1. The change in monthly payment of MBS to be calculated for a 5mn mortgage, LTV is 80%, initially it is interest only...

I work with an investment bank and I do see the vega for IRS, hence the question.