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This helps very much, thank you David!

Hi @David Harper CFA FRM , thank you for the explanation - this seems to really clear things up. The concept I'm hung up on is that if a hedge fund has securities to use as collateral in a repo (for example, treasuries), why not just sell those, get the cash, and use that to fund the purchase...

I have heard that repos can be used to gain leverage, particularly within hedge funds. However, if repo sellers (who borrow cash) have to post collateral, and the value of collateral is reduced via a haircut, wouldn't this in effect be the opposite of leverage? i.e. repo sellers would be getting...

very helpful. Thank you for the quick reply and explantion!

Why is it that the test stat for VaR backtesting (Jorion) equals the sample estimate minus the population estimate divided by the standard error, while in Bodie, it equals the sample estimate times (n^.5) divided by the standard error? In other words - Jorion: (actual exceptions - expected...

Hi, within Tuckman's lognormal model, dr = a r dr + (vol) r dw. To clarify, is a equivalent to lambda (drift) and r equivalent to r(0), that is, the initial rate? I am struggling a bit between the initial formula for the lognormal model (Tuckman 10.5) and the formula which we'd likely use on...

Hi all, I'm trying to best determine what my approach should be for studying. I've done the following, in this order: Finish the readings, and take notes Re-read, but this time taking notes and making notecards for each LOB Do all the global topic reviews Finish all the practice questions At...

Thanks, David!

Think I may have answered my own question by forgetting that beta has variance of the portfolio in the denominator, rather than std dev

In the formula sheet for Marginal Var, it states that marginal var = deviate * Covariance(asset, portfolio)/(std. dev. of portfolio) It also states that marginal var = deviate * Beta(asset, portfolio) * (std. dev. of portfolio). Given that Beta(asset, portfolio) = Covariance(asset...

In the study notes for Stulz, the BSM equity price formula's D1 term is (ln(value of assets/face value) + (r + (variance of asset returns)/2) * T) / (std dev asset returns) * T^.5 However, in the attached spreadsheet, the BSM formula is closer to what we're used to seeing: (ln(value of...

In Gregory, Ch, 3, under the LOB Identify & explain the costs of an OTC derivative, Gregory seems to make some counterintuitive points. (page 10/11 in the study notes) At the onset, I would imagine that a bank would hedge an OTC derivative with a hedge that would pay out when the bank has a...

Got it. Thanks, David!

I saw that in some seemingly older videos, David includes a score of testability per topic. Is this statistic still prepared/shared for 2021 exams somewhere? Would it be possible to see a review of which topics might be the most "testable"?

In Choudry, Explain the decline in demand in the new-issue securitized finance products market following the 2007 financial crisis, it's written that structured products provide inherent leverage. Is this just because the originators of structured products themselves would take out loans to...

Did anybody receive an email from GARP? I have my status online, but never received a mail.

I've noticed that when calculating VaR/variance/std. dev of 2+ assets (or portfolio), sometimes the correlation/covariance is included, and sometimes it's not. I.e. for standard deviation of 2 assets: sqrt[w(1)^2*variance(1) + w(2)^2*variance(2)+2*w(1)*w(2)+covariance(1,2)] where (1) = asset 1...