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Hi David, I am writing to seek some clarification on the calculation of PD and LGD in the edit grid. I noticed that the expected rate of return of assets is used instead of the risk free rate.While on the other hand, i have observed in the subsequent spreadsheet on the calculation of the...

Hi David, I have similar problems with the understanding of the $925million raised by deposits in the above example. Your reply does help to clarify. I have another question on this example : why is the numerator of the RAROC called risk adjusted return? Is it because it also include a...

Hi David, Going through the Basel II readings, i noticed that in the 2008 FRM exams, there are no AIMS/Learning Outcomes for the Basel readings unlike the 2007 exams except that candidates are "expected to understand the objectives and general structure of the Basel II accord and general...

Hi David, I have come across the following question in the reading. How does tax carrybacks and tax carry forwards affects the tax benefits of risk management? My understanding is with tax carry forwards, the present value of future taxes can be reduced as current losses can be...

Hi again David, I have another question on the measurement of operational risk under the Basel II AMA approach. There are 3 further approaches under AMA namely :internal measurement approach, LDA approach and score card approach. Are these 3 approaches mutually exclusive? Does a bank have to...

Hi David, As i was going through the chapter on LDA modelling approach to calculate operational risk regulatory/economic capital, i came across the terms "empirical distribution" and "parametric distribution". Not too sure what's the differance between the two. In context of the reading on...

Hi David, Could you help enlighten me on the differances between the following terms used in the Canaborro reading on measuring and marking counterparty risk : credit valuation adjustment and market value of credit risk? Is the net market value of credit risk = V(B)-V(A), the same are...

Hi David, I need some help in understanding :regulatory capital & economic capital and how they come together in the FRM course.I have some introduction into economic capital while reading counterparty risks and would like to get a bigger picture of what's going on.Here is what i have come to...

David, That was a great help as the same example is extended to the next chapter on portfolio effects on expected and unexpected loss. By the way, while reading the Chapters 5 & 6 of Ong, i noticed that a few AIMS require the candidate to "derive mathematically a certain formulae " my...

Dear David, As i was going through Michael Ong's Chapter 4 on expected loss, i have come across the following formulae Adjusted exposure on default = Outstanding + Usage Given Default * Commitments However in Table 4.2, Adjusted exposure = Outstanding + Usage Given Default...

Hi David, Thanks for your reply. Could you also have a spreadsheet out to illustrate how the bucket analysis work and compare and contrast it with the key rate analysis? I find of all the Tuckman chapters on Fixed Income, Chapter 7 is the most difficult to understand. Kind Regards...

Hi David, I must say after viewing your excel spreadsheet on key rates shifts, i could understand it very much better. 1.Could you provide a spreadsheet for the key rates exposures for hedging instruments similar to table 7.2 of Tuckman's? i have trouble understanding how these key rates...