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My co-worker and I we're having discussions about calculating the market value of a future. We determined that the market value of a future was actually just the current variation margin of the futures contract (e.g. If money is owed - margin call is required). So I got confused...in FRM...

In Jorion's Value at Risk book he mentions a few times about calculating the "maximum likelihood ". Can anyone explain what he is talking about?

What does it mean when a bond has negative duration? Similarly, for negative convexity? Let's say duration was -5 and convexity was -.05. What does this mean for the bond's price and its relationship to yields?

David, Is there a way I can still view past early bird webinar's for 2009? I tried clicking on them, but it was only 3 minutes long and there was no sound. Dennis

David, When will we find out if our 2008 membership is expiring? Will we be notified via email? Dennis

I passed the 2008 FRM exam too, but I'm not sure how? I was ready to register for bionic turtle FRM 2009, since I didn't feel like I had all the concepts down. I'm actually tempted just to study bionic turtle FRM 2009 just so I have everything down...

I think I got the MG question right in the 2008 FRM exam, but I confuse myself when thinking about why positions lose value in contango or backwardation. For the short position in long-term forward contracts during backwardation, these gain value because it locks in a higher price in the...

I was surprised to see the binomial and Poisson critical stat tests too, so I got caught off guard there. I don't recall any questions concerning the Chi or F distributions.

In the following formula, how do you determine n in the question below? The question doesn't mention the sample size. The answers seems to indicate that n = 3. SEE = (SSE/(n-2) )1/2 10. Paul Graham, FRM® is analyzing the sales growth of a baby product launched three years ago by a...

I think $10,000 is the price of one Eurodollar futures contract

Can you clarify the explanation for this question? I don't understand how it answers the question. Here was my approach to this problem (please correct if I'm way off track): 1) MBS securities -> negative convexity 2) Steepening yield curve -> higher yields -> lower prices I thought...

I'm having problems applying the square root of time rule for this problem. I converted all the portfolios vars to yearly vars, so that I can compare "apples to apples": Var2 = Var1 * alpha * squareroot(Time2 / Time1) So for portfolio #1: 10 * 2.33 * squareroot (252/5) = 165.41 I did...

Can you also clarify the explanation for this question concerning gamma and delta? I automatically discarded answers A and D, since delta-neutral imposes less risk to price changes...so that leaves B and C. I chose answer B since a positive gamma and positive delta position means much higher...

Can you clarify why only 3 PV calculations are required here? I thought since the bond is 10 years, then 20 PV cash flow calculations are required to determine duration (assuming semi-annual payments).

Is there a short cut to computing the duration below for the 6% 10-year bond in the question below? The question doesn't mention if the bond is semiannual or not. Do we assume semiannual? If so, then I would have to compute 20 present value calculations for each cash flow, which seems time...

I have attached an image pertaining to this question. I chose answer D for this question, but the correct answer was C. I know the graph displays a callable bond due to the negative convexity from points y1 to y2. But why would convexity be 0 at point y2? 52. What bond type does the...

Here's another question that seems related. Does "highest time value" here mean highest theta? If so, then based on the "Time to maturity versus Theta" relationship (see market notes and Hull), the at-the-money call has the lowest theta (decreases exponentially) as time to maturity approaches 0...

According to the Time to Maturity versus Theta graphs, Theta decreases exponentially as the time to maturity approaches zero for at-the-money options. I believe this tells us that time becomes a smaller factor of risk as the option is about to expire?

40. In the Geometric Brown Motion process for a variable S, I. S is normally distributed II. d ln(S) is normally distributed III. dS/S is normally distributed IV. S is lognormally distributed a. I only b. II, III and IV c. IV only d. III and IV To answer this question. I...

37. An equity options trader is short a call option of a stock with strike at $104. The maturity of the option is within half an hour and the current price is $103.75. Which of the following Greeks poses the highest risk to his position? a. Delta b. Gamma c. Rho d. Theta To answer...