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I have edited my reply to clarify that high F means implies low PD, because good economic conditions would mean low PD. Also note, in default rate calculated under vasicek, you'll see that F variable has a minus sign.

Two tailed distribution. Will give positive and negative. .999 is area under the curve, which is the probability. Probabilities less than 0.5 correspond to negative values. You may draw a bell curve, zero (mean) in the middle. I hope it will make sense. Let me know

for your 2 questions, answers are yes and yes. Note: ES is a spectral risk measure because it involves a weighted average of losses exceeding a certain percentile, effectively integrating the entire tail of the loss distribution beyond the VaR threshold. This means it considers not just the...

Your interpretation is correct. The VaR 19.5 indicates that, with 99% confidence, the loss will not exceed 19.5. There is a 1% chance that the loss could be between 19.5 and 20. Also, for a uniform distribution over a range of 50 units, the probability of any 0.5 unit interval (such as from...

VaR, historical var, credit VAR, credit losses, default correlations. There is a list. But best to read that last book on valuations from part 1. In any case just jump to level 2 you'll be fine. I had 4 year gap in between, but nothing much to be honest. P2 will make you revisit everything :)

There are many videos, please could you specify where have you seen it? Re:NAV it's the net asset value. The one divided by shares is called NAV per share. Correct we subtract liabilities from assets that gets us the NET. However sometimes when there isn't any liability then asset or net makes...

These are two different tabs. You are looking at 29.7 CMS there 80.24% is given as is, not calculated. Where as in 29.7 replicated portfolio tab it's calculated. You'll find the method up there in chain of comments, I also commented. So basically you are looking at two different cases.

Is it tab 27.9 of the spreadsheet? Plz let me know where you are seeing 0.8024 risk neutral probability. I'll be able to help you out.

GARP material, page 337, there is LOS as follows: Describe the motivations for and calculate the capital conservation buffer and the counter cyclical buffer, including special rules for globally systemically important banks (G-SIBs). The exhibits in notes are demonstrating that: key take away...

I remember coming across these readings when i sat in nov 2022. The notes cover pre-post GFC on Basel, its just the GARP writing in detail as usual. this all could have been nicely wrapped up under one, i think it could be the lenghth of material that compelled them to split into 3. another...

its simple difference just to show how Lognormal results different from the normal VAR 1.645 for 90% Because its two-tailed. Note from the z-table: two tail's 90 % is 1 tail's 95% which is 1.645 deviate. for two tails 80% its 1 tails 90% which is 1.28 deviate. Edit: i just noticed David had...

practice daily. thats how you pass part 1. good luck

Detailed material, i see it as a way not to miss any spot. you have to weigh in more practice examples. because sometimes reading words may not help us absorb the concept, until we engage in the example problems. i learned significantly through those examples. Im sure youll smash it in the next...

well done!!

Identify n, the number of trials. Identify p, the probability of success on a single trial. Identify r, the number of successes you want. Plug these values into the formula: P(X=r)=nCr * (P^r) * (1−p)^(n−r). This is also called the probability mass function (PMF) denoting probability of r...

Jose, to compute the Value at Risk (VaR) in dollars for your spread trade, you're on the right track. You can use the following steps: -Compute the portfolio volatility (vol_port) based on historical daily returns of the spread trade. -Apply the normal approximation for VaR (%) = vol_port *...

Mutually exclusive and independent not necessarily mean the same thing: Mutual exclusivity is the condition that the intersection of two events results in an empty set (A AND B = EmptySet). This is satisfied when P(A AND B) = P(EmptySet) = 0. Although P(A AND B) = 0 means mutual exclusivity...

Credit RIsk Lets summarise, Risk Capital: Risk Capital is similar to Economic Capital but incorporates Strategic Capital. Formula: RC = WL - EL (with a 1-year time horizon). Economic Capital: Economic Capital is an internal estimate of the capital needed to ensure solvency with a specified...

Kr01 is a type of partial duration . There are other types too, this is one of them. The thing you have highlighted in green, I can confirm with 100% conviction that it's an approximation and not exact equal. Here you see it's a quicker way to get to PF duration but not an exact one, rather an...

No, partial 01s and key rate 01s (KR01s) are not synonyms because they represent different interest rate risk measures. Yes, the key-rate framework is used for key-rate 01s to assess the impact of specific key rate shifts. No, summing up all KR01s of a bond does not give DV01 because KR01s only...