Recent content by Clay Carter

@Vicky26 Let's sort it out by looking at the direction of the two deltas rather than just the end result. In your first case, +20 moves to +21 and -10 moves to -9. Look at the direction of change on each trade. One went up by 1, and the other also went up by 1 (it became less negative, which is...

Hi @Vicky26! You're thinking about this correctly in terms of the mechanics, but what the slide is trying to convey is a bit more subtle. Let me walk through it. The slide says netting only helps when the MtM values have opposite signs. That's the whole point. Netting collapses multiple...

@Vicky26 The key thing to remember is that V(T,X) in Hull's notation is already the WCDR. It is not 1 minus something, it is the worst-case default rate itself at confidence level X. So Credit VaR = L(1-RR) x V(T,X) is just saying worst-case loss = exposure x LGD x worst-case default rate...

@Nicole Seaman @Vicky26 Yes, I believe the reference is to Market Risk under Meissner, Chapter 5.

@Vicky26 The thing to remember is that V(T, X) in Hull's notation is already the WCDR. It is not 1 minus something, it is the worst-case default rate itself at confidence level X. So Credit VaR = L(1-RR) x V(T,X) is just saying worst-case loss = exposure x LGD x worst-case default rate. Totally...

Hi @Vicky26 @Vicky26 When we built Table 8.4, we wanted to highlight this dynamic. The Senior Tranche VaR can look surprisingly large, and we know that raises eyebrows. After all, the whole pitch of the senior tranche is that it is the safe piece of the structure. But notice what we...

Good question, and it gets at something students often trip over in this example. The time frames are actually intentionally different, and that difference is what defines the loss. Think about what Credit VaR is measuring: you hold the bond today (t=0) at a known price, and you want to know...

@mary1997 The example assumes two assets: Asset A with a 10% expected return and 10% standard deviation, and Asset B with a 16% expected return and 20% standard deviation. The risk-free rate is 6%, the correlation between A and B is 0.30, and their covariance is 0.006. The "most efficient"...

@raghavendragprasad@gmail.com I had to look into this more and I found some interesting things (none that change the above question). Since this is an equity option traded on XOSE, it stays classified as an ETD regardless of the BIAG agreement or the timestamp difference. The bilateral...

@TNguy5296 Great question, and don't worry, this is one of those small details that trips up almost everyone the first time through Dowd! Let me walk you through it: What exactly is "p" here? You're working with the binomial standard error formula for VaR, and the "p" in "Bin, upper, p" is...

@Tracy M. Nolte Good question. CreditMetrics always uses cumulative probabilities when mapping to normal cutoffs. What you’re noticing is not a conceptual change I just was a little inconsistent on my wording. To map transition probabilities into the standard normal framework, CreditMetrics...

@Vicky26 I'm sorry this was not covered. I put together some slides and I will try to shoot a video this week. Here are the slides.

@Vicky26 Are these the three LOS's you are referring to specifically? If so I can try to get something together for you. Explain how bond returns can be decomposed into carry, rolldown, rate-change, and spread-change components. Calculate and interpret the components of a bond’s return based...

@Tracy M. Nolte The Learning Objective for Credit Risk Reading 4 (Schroeck, Capital Structure in Banks) focuses on describing and calculating unexpected loss (UL) and understanding its role in economic capital. The text clearly develops standalone UL and portfolio UL using...

@IDosh1374 I have never seen a work experience submission and I also have never known of anyone who did not receive the designation because of their work experience submission. In general they just want a brief overview of what you do in the risk management field.