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Hi @David Harper CFA FRM Out of interest. How would you price a credit risky bond? So given that a bond has a credit curve (CDS) (flat or otherwise), a recovery assumption and there exists a zero curve off which to price from. What is interesting is that a z-spread is a flat rate added over a...

Hi @David Harper CFA FRM, from the above statement I don't see why Theta would be positive? Since time and vol could push the put option out the money. Is the reason here for why a Deep ITM put will have positive Theta is that as time passes, volatility would be nearly negligible and that as it...

Passed! 2,1,3,2,1 Thanks BT Team

Hi @David Harper CFA FRM, Do you have any insight on the below: WWR: If you are short a banks stock, and the bank value falls, so the value of your short trade goes up..Is this WWR? Say you long a call from an airline on oil, if oil goes up the value of the call goes up, and the airline which...

Hi @David Harper CFA FRM, Thanks for answering the prev. question! I know you may be quite busy now, but I have some last few questions where I hope that you could please :confused: find some time to look at them, all VaR related: #Say, an index halted trading for 5 weeks, during that 5...

Hi @David Harper CFA FRM Just wondering about this (what do you think): Say, an index halted trading for 5 weeks, during that 5 week, would the VaR of a portfolio replicating the index be 0 or unchanged from before the halt in trading? Is it correct in saying here, that VaR cannot be zero, so...

Hi @David Harper CFA FRM I am trying to understand the credit exposure profiles in Ch13. For an IRS (Pay Fix, Recieve Float): The scenario in the notes where i_fix>i_flt initially, then reverses afterward, as the yield curve slopes upwards. Why initially when I am paying net on the swap the...

Hi @David Harper CFA FRM, What is the concept of "funding cost" being mentioned in the chapter? What is the difference between a funded derivative vs. an un-funded one? And what is the funding/liquidity risk related to? I understand it as the ability to obtain a loan and the i-rate one has to...

@David Harper CFA FRM , thanks. Would it not be 2*0.4 instead of 2%*0.4, as it says that the gamma is $0.4m per 1% move? Sorry, I see you did apply it as above.

@David Harper CFA FRM How does one approach a question like this: The bank has a position on USDRUS options that has a delta of $2m and a gamma of $0.4m (per 1% move). The USDRUS exchange rate is 14.2. What position would you take to make the position delta neutral? After a short period of...

*Please ignore the previous comment, I was trying to figure out how the quotes work. Thanks @ami44 , Why does our derivative portfolio increase in value as our credit spread increases though? I understand that the price of (new) derivative transactions will go up, but why would the value of...

@David Harper CFA FRM On the DVA subject, am I correct in saying that (for our example), DVA is added to the price because as a counterparty you would need to be compensated for the risk of me defaulting. Hence, I pay a higher price, because DVA is the risk of me defaulting. Taking it further...

Hi David, Is the 2017 part 2 material up to date with the new objectives?

Passed! Q(1,1,1,1) . Thanks BT Team:)

Thanks David, that does make more sense. I was thinking about it from a price I would charge the counterparty as opposed to the price that I would pay on the transaction. So it's basically how much would I pay for a contract knowing that I am exposed to the counter party defaulting.

Thanks @David Harper CFA FRM, I have started reading up, but this is something that baffles me, when pricing a derivative, the price is: Price Contract=Default free (risk-free) price + DVA - CVA I don't understand why this is, if as a bank we are pricing a contract for a client, why would I...

Hi @afterworkguinness, Do you have anything that can explain OIS discounting in an easy to read fashion? For instance how OIS relates to multi-curve discounting and what some practical uses are? To my understanding it sometime is just a 40bps spread over the rf rate.

Hi @David Harper CFA FRM With regard to CVA, it is to my understanding more than just a calculation. Can you point me to a document to explain a trading desk may manage CVA and DVA. Or something that explains the concept an an intuitive, but layman fashion?

Hi David Harper CFA FRM, I just wanted to understand something on scaling volatility. When one does readings, people plot a graph of rolling volatility. What I would like to know is that, if you have a time series of data, and the log returns of that data. Say, you want the 60-day vol today...

Hi @David Harper CFA FRM / @ShaktiRathore Have you had a chance to look the above? Hi @S666, I see you posted some of these questions a while back, could you guide me on them? Also, some final ones::eek: -Can VaR be zero on a delta-gamma neutral portfolio? Or a delta neutral portfolio...