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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...

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...

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...

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...

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...