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Hi David, Here is my understanding: assuming coupon is 6%.. YTM<6% means premium bond. When maturity increases, bond price increases, so it is cheaper to deliver S/T bond... is it correct? so does it mean CF is fixed? Thanks.

Hi David, http://learn.bionicturtle.com/images/forum/nov18_crm.png In your figure above it seems FIRB and AIRB treat derivative differently.. could you elaborate? Thank you!

Hi David, Could you pls clarify this question? I wonder why “as yields lower than 6% imply that the CF for long-term bonds is lower than otherwise. This will tend to favor bonds with high conversion factors, or shorter bonds”? what is the relationship between CF and maturity? Thanks...

Hi David, I wonder if ABX protection buyer shorts ABX? If so, if there is any credit loss, the protection buyer will compensate the buyer, and meanwhile the ABX price also drops, so the ABX protection buyer who shorts ABX also gains.. is this a double-dip? or I misunderstand something? Thanks.

Hi David, Hopefully, this is my last question on this topic. :) Is IRC for specific risk only? Thanks.

Hi David, Just to double-confirm, so under market risk capital, the it is 10-day VaR calculated daily, right? if parametric, under Basel the 10-day VaR can be scaled up from 1-day VaR, or can be calculated directly (with 10-day volatility), right? Thank you!

Hi David, 3. So under IRB, the credit risk RWA = RWA from IRB + RWA from securitisation (using RBA, SF, or IAA)? 4. I can partially understand why migration risk can go to market risk capital.. but for default risk, isn't it already captured in credit risk capital? will including in...

Hi David, just to double check, Is the scaling factor for IRB only or for the total risk capital? I am asking because I remeber you said it applies to the total: http://forum.bionicturtle.com/viewthread/1841/#3722 Thanks.

Hi David, Thanks for your detailed explanations! 2. Is the risk weight function actually the ASRF formula? I understand ASRF is used in both FIRB and AIRB, right? And can bank choose to use another model? 3. Are RBA, SF, and IAA part of ASRF, or they are parallel to ASRF? If they are...

Hi David, I have some question about the convention of the inverse floater? Is it $33.33M or $100M? I thought it was $100M and the fixed was $300M. If it is $33.33M, should the VaR calculation be: 3*4.5*0.0066*1.65*33.33M instead? Thanks.

Hi David, 1. Is the estimate of correlation provided by regulator under Advanced IRB? 2. Does IRB also account for Credit Risk Migration (CRM)? 3. What is the purpose of Ratings-Based Approach (RBA), Supervisory Formula (SF), and Internal Assessment Approach (IAA)? Are they for the...

Hi David, so if there is correlation between loss events (serial correlation?), Poisson should not be used for frequency, right? thanks.

Hi David, so is it also true that the weight (the alpha or (1-lamda)) of the innovation term also decays exponentially? Thanks,.

Hi David, "A portfolio has two risky bonds. each bond is $500000. the monthly PD for each is 0.1682%. What is the best estimate of the monthly 99.9% credit VaR for this portfolio, assuming no default correlation and no recovery? a) $841 b) $1682 c) $998318 d) $498318" Answer is d...

Hi David, A portfolio manager invests $100 million in a 5-year inverse floater paying 18%-2*LIBOR. The modified duration of a 6% 5-year bond is 4.5 year. What is the 95% VaR of the inverse floater if the yield volatility is 0.66%? a) $3.0M b) $5.9M c) $8.9M d) cannot be determined my...

Hi David, so C-Strip is just a zero bond, and one couponed treasury bond can be stripped into many C-Strips. On the other hand, mortgage IO is a packaged bond.. and one pool will be stripped to create just one mortgage IO.. Is this correct? Thanks,

OK, thanks anyway David!

Hi David, In the table for the first row (Active beta surprise), return/risk=0.02/0.16=0.125 <> 0.23 (IR). so it seems not that way.. :( Thanks.

Hi David, I see.. now i put the pieces together... But looking at the table, I wonder how IR for each factor is calculated? (what 'benchmark' should be used for each factor?) Thanks!

Hi David, I understand EWMA's weight decays exponentially. I wonder if GARCH has the same property? Thanks.