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Hello, I am sorry for the dumb question, but what exactly is a credit conversion factor? Is this just like a risk weight as shown in p 81 of the operational risk notes? Thanks! Shannon

Certainly does. Thanks again! Shannon

Very helpful, as always. The unpredictability makes me a little afraid to take this thing but I think some fear is a good motivator. Thanks again, Shannon

Hello, After looking through your list of questions concerning the Ashcroft reading, it is almost as if we should be reading this as a case study. What I mean by this is that many of your questions ask about specific details of the actual securitization that was discussed in the chpater. Are we...

:(PLEASE forgive me for this additional follow-up but I think the critical point that I am missing is exactly why the OAS is going down. Does all of this analysis mean that the price of the security, along with the z spread would be staying constant? If so, your argument makes perfect sense...

Thank you. I think I get the idea of OAS a lot better now, but the idea that it gets smaller as volatility increases is still a mystery. As you said, when volatility increases the option cost would certainly increase, as would the Z spread, and therefore the price of the bond would decrease...

Hello, The assigned reading seemed to make a distinction between these two concepts, but in the notes the Z spread is often used in lieu of the zero vol OAS. Is there a difference between these two concepts? If so, what is it? Are there times when both mean the same thing? Also, the idea...

Hello, I read the chapter and the notes on this topic and and had a couple of questions. The pure math of it makes sense, (just partial derivatives) but what do these terms (p 30 and 32) mean in the real world and how exactly are they used for hedging? I read that the cross gamma term has to...

Thanks again. Shannon

Thank you for the extremely detailed explanation. If I may ask a VERY brief followup question: you mention "absolute CVaR" above and I do not believe I have seen that expression before. Is this kind of like absolute VaR where we need to include the drift (EL in this case, possibly)? If so...

Hello, I am reading the Crouhy chapter now. It makes a lot of sense and reads really well. The only problem I have had so far is with the jargon. At one point (figure 14.12 on p 545) there is a graph showing "the poorer the quality of credit, the larger the Expected Loss ans attributed...

No way! You are awesome! Some of these authors, on the other hand... Thanks again, Shannon

Thank you so much for clearing that up! I also like (please excuse the sarcasm) how this author classifies lognormal as a light tailed dist when in part 1 it was usually referred to as a heavy tailed dist. As you mention, it is the excess kurtosis that gave it that distinction, but this...

Hello, I had a couple of very random (and hopefully easy) questions about videos 7a and 7b from last year I was hoping someone could answer for me. 1. When talking about the spread for LVaR, how exactly is that computed? What is a 2% spread? Does that just mean, for example, if a security has...

Yes it did. Thanks! Shannon

Hello, From the constant-spread LVaR adjustment formula, we see that when we increase the holding period, we decrease the adjustment. When you (or Dowd) says "holding period" what exactly are you referring to? I assume this means the time over which you liquidate the position, because this...

That makes perfect sense. Thanks! Shannon

Thanks! If I may pose a quick follow up to that question, in that video it states that a "lower risk rating is given to an asset with a longer tem to maturity." So, from your explanation above, this means a security with a longer maturity has LESS risk? This seems counter-intuitive, unless I...

Hello, I understand what credit risk is and what the ratings mean, but sometimes the vocabulary seems little vague. For instance, in video 6d, you say that a lower risk rating is given to an asset with a longer tem to maturity. I hate to even ask this question because I feel a little silly...

That was very helpful. It is also nice to know that I am not just overlooking something very simple and that there is at least one other person out there that finds this as strange as I do:). Thanks! Shannon