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After taking a chance and sitting both exams in one go (there's no test centre available in my country, and I figured that saving an extra set of airfare and accommodation was worth the extra work), I'm pleased to say that with BT's help, I got straight Q1 all through! To say I am relieved is an...

You have: Beta (USD, Portfolio) = Corelation(USD)*Vol(USD)*Vol(Portfolio)/Variance(Portfolio). The correlation of the USD investment with the portfolio is not 0.6. I think that is the part you are confusing. To use your method, you would need to have the correlation rho(USD, portfolio). What...

The power of search..! For a niggling question** I just found this answer above about the specific risk charge wrt how it is actually calculated. What I understand (imagine this as a flow/process diagram - in fact, Basel in a decision tree format would be fairly awesome): A. Standard...

The question also mentions that this is a basket of 100 single name CDS swaps. As far as I understand it, then, that's essentially a standard basket that is then tranched into a senior/sub combo. Any suggestions on this and where I might have gone wrong? ShaktiRathore, your help was valuable...

Hi intuitive... The example in Malz ch 9 (tables 1 and 2) is very informative. The short answer to your question, IMHO, is that the trust account (which is the same as the o/c account I think) is funded first from any positive excess spread. Equity holders are last in the queue. There is...

So ShaktiRathore, the implied convention then is that we generally assume indirect quotation, which is where the answer would then fall out. Is there a precedence/convention listed somewhere that you can share? I know of the somewhat vague "Commonwealth country" convention (there are alot of...

I'm a bit confused. I thought the generic form of a pair is "x A/B" meaning it takes x units of B to buy 1 unit of A, regardless of if it is an indirect quote or not. Then, how are the two statements in the question equivalent? (1) 1.35 AUD/CAD ==> 1.35 CAD per 1.00 AUD (2) 1.35 AUD per 1.00...

Oh, ok... I get you now :) Exposures vs. data. The word "exposures" implying detailed information (which I don't agree with but maybe that is jargon I haven't picked up yet), whereas data is more generic... I suppose I assumed that the caveat of "in a timely and understandable way" meant that...

Hi ShaktiRathore, thanks as always for your quick response. I'm just making sure I understand you properly. You are saying then that the RMU is least likely to care about D - providing information to management? I would have thought that D is still important, given the list of objectives in...

That's an interesting point David. Taking a five-minute break from question solving, perhaps indulge some thought-experimenting :) it may be useful discussion (post-exam?) for someone. Suppose we had the following setup for two instruments (hypothetical numbers which hopefully are internally...

I have a variant on the OP's question. Suppose that you are of the view that correlation is higher than the market thinks it is. There is a CDS basket available on 100 names (equal value), divided into senior and subordinated baskets (sub detaches at 20). What would be the trade most consistent...

I've been doing some practice questions on Risk Management, and I came across this one below. I couldn't see which one of the choices was least accurate at all. They all seemed to make sense, and fit in with the source text (Litterman). Which of the following statements is least likely an...

I have a quick query about the AIMs and this high-water mark concept. Given that the AIM refers to Ch 11 of the text, which uses a more broad-brush approach to describing the HWM, would we be expected to apply the level of detail found in Ch 15 (which you also refer to above)? I found the Ch 15...