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David, This is not a "how to" question related to IR swap. More of an exam strategy thing. Having gone through valuing a IR or currency swap via the bond methodology and the FRA methodology, it seems like the bond route is "faster" to compute -- certainly in a timed exam setting. (The FRA...

Got it! Lucid explanation as usual....Thanks!

David, Minor nit... In the various Credit Risk readings -- PD and EDF are used almost interchangeably. Are these exact synonyms -- or is there a usage context in which the use of the term "PD" is more appropriate than "EDF" and vice-versa. Are there some types of risk managers that would...

David, This is somewhat of a "meta" issue that is bothering me. I refer to your Mkt Risk Study Notes (pages 39-40) where you are showing us how to value a IR swap using the bond methodology. Here's what's troubling me: 1. You are showing us (in the spreadsheet on page 40) the 3 fixed-rate...

Great stuff David...I need to absorb your explanation...I am sure it will sink in, but as usual you've provided an authoritative response....I'll reach back to you, if the fog has not lifted.... On an unrelated note, on slide 46 of the Credit Risk A slides, you've.... Probability of...

Hi David, I am watching your Credit A, Part 1 episode 7....I think I understand the Merton model for valuing the debt of a firm. I've also understood the mechanics of working the associated EditGrid that you've. However, I am missing the so-what aspect? I know it is dancing in front of my...

David, Could you post "prominently" when you update the study notes? It is likely too cumbersome (if so, forget it) but is it possible to indicate what changed -- I say this only in the interest of saving additonal trees...and reprinting only the changed pages. --sridhar

1. On page 11, you have: Step #2: Calculate marginal probability of defaults. In year one, the implied marginal probability of repayment (p) = (1+5%)/(1+6%) such that the implied marginal PD = (1-p) = 1-(1+5%)/(1+6%) = 99.1%. Similarly, in year two, the marginal PD = 2.7% David, if you...

David: Don't be mad at me...but this kinda my thing. Finding typos:-) In the para starting "A linear probabilty model uses....3rd line in the para...you talk about casual variables. Did you mean causal? --sridhar

This is a technical nit...Using the terminology of the reading, is the "Contractually promised gross rate of return on a loan" is this 1 + k or just k..... I know the difference -- but technically which is correct. Is it the case that k and 1 + k are used interchangeably to refer to the...

Under the warning note starting with "Do not make the mistake to calculate...." You have: Rather, the expected return = (1.1)(0.9) = -1% Should it not be: (1.1)(0.9) - 1 = -1% If I am the bank providing this loan, how should I interpret the negative 1% return? This is how much it is...

http://www.bionicturtle.com/learn/article/key_rate_shift_technique_9_min_screencast/ David: I tried to leave a quickie pat-on-the-back comment to your 3 mini-screencasts via the "leave comment below" thing. But your site refused to accept my many attempts to correctly type in the "word I...

David: I am watching Market B, Part 1 on fixed income bonds episode. I refer to pages 47 & 48 of the screencast PDF. On both pages, you ask the same question: "What is the monthly compound rate that corresponds to a market rate of 6%." Seems like you are asking the identical question...

http://www.bionicturtle.com/premium/editgrid/2008_frm_fixed_income_spot_vs_foward_vs_discount/ I refer to the above. I get the Tuckman-inspired calculations. You also included the Hull continous compounding calculations to compute the 6-month fwd rate. Can you show me which learning outcome...

Hi David I understand...You provide a great product. I am still struggling through the core readings (the Tuckman readings are giving me fits...the Hull ones on Mkt Risk are more fun) and I hope to provide you feedback on the Spreadsheets as I sink my teeth into them. If you change a...

Hi David: I am going offline for about 3 weeks in the next month or so. I am downloading all the Edigrids to offline Excel docs. What is the best way to work through this, assuming I've studied the underlying core material. I mean, when I open the XLS at 1 AM (!) -- are these XLS'es...

Thanks again David....I am on it....BTW, do these calculators also provide statistical functions like NORMSDIST, NORMSINV etc -- for instance to compute option prices using BS formulae...If not, how do we handle this during FRM?

This is probably answered elsewhere...But I thought I should ask my friends here:--) I've been using Excel as a calculator when it involves dealing with arithmetic containing "e", CDFs of random variables that are normally distbd etc. (e.g. pricing an option using BS formula.) I am...

Got ya! Over the next two months, there will be several weeks, where I will be away from any sort of Internet access. Which means, hopefully, I can focus on your FRM materials. This is why I like to archive your newsletters -- including the answers -- to my laptop. (Remember, a while ago., I had...

David: Great explanation. Thanks. All clear. BTW, the Credit Risk Episode 8 newsletter -- the answers links for each of the questions -- do not have the answer. It takes me to a forum page which restates the question without the answer. Am I missing something? --sridhar