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Why is higher recovery rate means higher implied prob. Of default? And if that is the case then changes to CVA will be net of increase in probability ofdefault and decrease in loss amount.. So will the final CVA lesser if the recovery amount is increased? Thanks Kavita

Hi David, We have two formula for beta 1.beta= (cov Ri, Rp)/ variance(Rp) 2. Beta = (cov Ri,Rp)/std(Ri)*std(Rp).. Which one to use when, I mean which is correct? Thanks Kavita

Very poorly written article in my view.. Very repetitive in concept in para after para.. The author seems to lack clarity of thought.. Rightly said WORKING PAPAER....

Hi David, In meissner readings you have mentioned that in 2007 crisis, model for volatility and correlation was not a problem.. It was the inputs to these models that was problem, garbage in garbage out.. The I was reading crouchy in ops risk (model risk), from what I understand is that the...

HI David, Gregory says that CCP may suffer from winner curse where the lost cost CCP provider ends up with more risky products and less credit worth members.. How is that? Thanks Kavita

Hi David, when we compute CVAR using the quantile methodology for a single bond according to Malz.. Say a BBB rated bond was bought at 106$. The probability of bond migrating to BB is 1.74%, priced at 98.10$ C is .3% priced at 8.64.$ default is .18% priced at 51.13$ IF we have to calculate...

HI David, reading on this topic says" 1. "The classical view is that firm should provide funds freely to solvent but illiquid firm. However, in the short run it can be difficult to discern the difference between illiquid troubled institutions and illiquid sound institutions." What is the...

Hi David, How do we find the shape on the implied vol curve based on the shape of distribution of underlying.. Thanks Kavita

My biggest worry is that exam tends to be very skewed towards one topic and if that happens to be not my comfortable area,I am gone... The questions in the exam are not diversified at all.. This is my biggest worry.. What is your's.??? Part 1 in Nov had 4 problems from ES. So if some one did...

Hi David, Please can you help me with this problem. I am struggling with how do I take the confidence interval into consideration while calculating the CVAR. A portfolio has n credit, total portfolio value is 1,0000,000. The probability of default is 2% for each credit. Assume zero recovery...

HI David, we have definitiions of various actives.. 1. Active return : Portfolio return - benchmark return 2. Active risk : Standard deviation of Active risk?? 3. Active weight.. No idea Please can you help.. Thanks, Kavita

Hi David, Please can you explain me the meaning of high water mark? Thanks, Kavita

Hi David, I was reading the Stulz chapter from GARP readings and what I understand is that in the PD calculation in Merton model, Stulz uses Risk free Debt ( F*exp(-r*t)) in the formulae so instead of ln(asset value/face value of debt), he uses ln(asset value/present value of debt). My...

Hello David, I am finding it little difficult to comprehend the way the words are drafted in problems related to computation of default probability. 1. The 10 yr bond pays annual coupons and probability of default is 2%. What is the probability that the bond pays three coupons and default at...

HI David, I dont know why but I am really confused about how to calculate CVAR. I read that CVAR is the total loss net of expected loss. Does that mean CVAR = Total loss-expected loss? or CVAR is unexpected loss..? How do we calculate CVAR. Thank, Kavita

HI David, 1. If I have two portfolios : P1 with ES = ES1 at 95% confidance interval and P2 with ES = ES2 at 99% confidance interval. How do we calculate the total Expected shortfall for the two portfolios.. Shall we convert 99% ES2 to 95% ( divide by 2.33 and multiply by 1.645) and add to...

Hi David, Information ratio = Alpha / volatility of tracking error. Jorion defines tracking error as active return -benchmark return But that is not how bodie defines it. Am I right?? Kavita

Hi David, Do you plan to post the question set for Grinold? Thanks, Kavita

Hello everyone , for BASEL, GARP has specified two types of readings: compulsary optional what is the purpose of optional readings? are they not going to be tested? are they only for knowledge purpose?What is your strategy to deal with this.? Please advice. Thanks, Kavita

Is CVA larger or smaller for upward sloping credit curve.. And why... Hi David Please can you help me with this question.. Thanks Kavita