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I think it is because deep out the money or in the money opt has very small gamma.. Thanks David!

Hi David, A similar question.. Could you confim the answer of the below question should be b not a? Not very sure.. Thanks. EXAMPLE 15.2: FRM EXAM 2002—QUESTION 38 If you use delta-VAR for a portfolio of options, which of the following statements is always correct? a. It necessarily...

Sorry again David.. :)) (cannot help smiling while typing) so you mean RiskMetrics only assumes conditionally normal, right? btw, conditional mean/vol is consistent with conditional normal, right? Thanks!

sorry David.. ND=normal distribution..

Hi David, I understand RiskMetrics assumes ND and also uses EWMA (a special case of GARCH). Does it mean GARCH can co-exist with ND? or they are not relevant anyway? Thanks.

Hi David, Sorry for the confusion. I think you are correct. Hull did not say it was long, he just gave a formula on p87 (6th edition) and it seems it is actually for short side. Thanks.

Hi David, BTW, could you confirm which side is "long" for FRA? receving fixed or paying fixed? it seems Hull uses L(K-M)(T2 - T1)exp(-rT2), so receiving fixed is the long, so it should be long 12 mo and short 6 mo.. i know this is minor, but just to double check. Thanks.

Hi David, Could you take a look of following questions? 1) Is it true that the difference between American calls of same maturity cannot exceed the difference in their strike prices. what about European call? 2) Is it true that the price difference between two American puts of same...

Hi David, As time passes, the *absoulte* value of Theta will incease or decrease for ATM opt? what about ITM and OTM? For 37, I think Theta works for short since it is negative.. so I wonder if the trader has a long position, which poses the biggest risk for him? Theta or Gamma? Thanks.

Hi David, Do you think if answer C makes sense? Should EL be deducted from 95%ile loss? or is this calc only related to Op VAR? Thanks. 33. Find the operational VaR at a 95% confidence level given the following data. Frequency Distribution Probability Number 0.8 0 0.2 1 a. USD...

Hi David, Could you take a look the following question? Does it mean the Op risk capital can include EL as well, and so different from credit risk capital calculation? Thanks. 30. According to the Basel Committee which of the options below is NOT a quantitative standard that a bank...

That you David! That is interesting..

Hi David, A lookback call option's payoff is final stock price - min stock price. Does it mean it is almost always positive? Thanks.

Hi David, Could you explain how to calculate the durations of interest cap and floor? (Not sure if these are required) Thanks.

Hi David, I feel for the same security, both long and short position of it should have the same price volatility because they share the same price with just opposite direction. could you advise? Thanks. for example ============================ 22. With all other things being equal, a...

Hi David, I also like to comment that I think the root of the confusion is partially how to calculate VAR using historical method (-10 or -7 or avg?). thanks.

Hi David, I also wonder if the wighted sum of weighing function of risk spectum is always 1? why is that? by definition? Thanks.

Hi David, Below is a 2006 practice question: =========== 2006.5. Given the following 30 ordered simulated percentage returns of an asset, calculate the VaR and expected shortfall (both expressed in terms of returns) at a 90% confidence level. -16, -14, -10, -7, -7, -5, -4, -4, -4, -3, -1...

Hi David, I see.. So does VaR comply with other properties of coherent risk measure except subadditive? Thanks.

Hi David, I just feel it is not intuitive if the 2 options are equal while one expires 1 yr from now, and the other expires 1.5 yr from now. Coule you provide your insight? Thanks.