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Hello, Do these two terms mean the same thing? If not what is the difference? Also, what does it mean when it says base servicing is money the "must be held by the servicer of the loan"? I thought this was at least in part considered a payment to the servicer for his services. Is this not...

In the chapter, it always assumes that the future spot rate is going to go up. All of the RN probs of going up are higher than the ones going down (positive drift). This, in turn makes the option less valuable than its expected value. If, however, the spot rates were favored to go down...

What exactly is K? Is it a percentage? Is it a dollar amount? Is it comparable to a risk weight? Is it comparable to the 8% in the standardized approach? It is mentioned a few times but it always seems to be in circular references. Thanks! Shannon

Hello, In the notes it makes a distinction between "disclosed reserves" as being tier 1 capital and "general loan loss provisions" and "asset valaution reserves" as Tier 2. I know this might be splitting hairs, but what is the difference between a "disclosed reserve" and the other two types...

Hello, As I was reading the chapter on hedge funds something looked strange. It has been mentioned several times that shorting assets is a way to gain leverage. However, in the example in the text, and in the notes, why would we have to give 10,000,000 to a prime broker so that he can sell...

Sorry, I think I am missing something really basic here, but I think I see the light at the end of the tunnel. If we have an interest rate sensitive item that should be considered banking book, this treated as a credit risk (99.9% 1 yr VaR), whereas if we securitize it and hold onto it, it...

Hello, I thought I understood the concept of what an unencumbered asset is, but this section concernign the NSFR is throwing my ideas for a loop. Does this just mean that the loan, bond, etc is not pledged for collateral? For instance, the RSF factor for an "unencumbered residential...

Sorry! Did not mean to sound like we needed one, you have done an awesome job, the worrier in me just wanted to make sure I was using every tool avaiable. Thanks!!! SHannon

Hello, I was just wondering if there was a last minute formula sheet that you recommend we look over. Thanks! Shannon

That was incredibly helpful. The whole "probablity weighted" phrase irked me because he seemed to mention it a couple of times and then just assumed that each of the quantiles was equally likely by not putting any less weight on extreme events. Thank you!! Shannon

Hello, Under Basel III, does the IRC include the CVA adjustments or are these treated seperately? I am reading some of this from Schwesser. The idea makes perfect sense but they do a TERRIBLE job at tying everything together. It says that it is a stand alone charge, which sounds like the...

Hello, In the notes it says that ES is the probablity weighted average of the tail losses, yet the way we always calulate it assuming that all of the "slices" have equal weight. Is ES defined as equally weighting the slices or is this just a simplification that Dowd makes? Is there an...

Hello, I had a very similar question, but I was just hoping to get a quick description of the differences between RBA, SF and IAA. By the way, one of the links up here is broken. Schwesser gives a horrible description for the RBA: "This approach must be used by any IRB bank that has an...

Hello, It was said that debt from international banks should never be rated higher than the sovereign that they are incorporated in. Does this also apply to corporates that are in other countries, (say Teva Pharmaceuticals, that is incorporated in Israel)? Thanks! Shannon

Hello, Please excuse me for the really bad question, but how exactly Did Rusnack use a prime brokerage account to make trades for Allfirst? I just dont know the mechanics of how this works. Did he tell BofA and Citi to make trades for him or did he trade on behalf of the two banks? Thanks...

That makes perfect sense. Thanks! Shannon

Are these the same idea? They both seem to be: [(Total value at end of period, including dividends, etc) / (price at beginning of period)] - 1 Am I missing somehing or does this just about sum it up? Thanks! Shannon

Glad I could help out! Thanks! SHannon

Intuitively I think it makes sense, because if there were fat tails there would be more of a chance of some HUGE outliers and this would increase the SE but the mathematics of it (from that formula, at least) does not seem to work. Does that make sense? Thanks! Shannon

Thank you for the very informative answer. I will try to wrap my head around the whole Dowd thing. Regarding the "fat tailed" comment, it was not said explicitly, but was certainly inferred when Cope said that in order to get the SE down to 10% (or whatever it was) it took 250,000 or 300,000...