david,
I learnt from ur screencast only that zero coupon bond has highest duration
and then order is zero>discount>par>premium.
so as per that logic for question below:
Q.19 A newly issued non-callable, fixed-rate bond with 30-year maturity carries a coupon rate of 5.5% and trades at...
Hi david,
I have a doubt in
Q. 5. Sarah is a risk manager responsible for the fixed income portfolio of a large insurance company. The portfolio contains a 30-year zero coupon bond issued by the US Treasury (STRIPS) with a 5% yield. What is the bond’s DV01?
a. 0.0161
b. 0.0665
c...
Thanks for the reply david.
But in your expanation
1st
average A = intercept + beta(A with respect to B)* average B is used to arrive at calculation for intercept and then
same formula is modified to
Regression (A on B): A = 0.2% intercept + 0.9 slope * B.
and
E[A|B] is calculated...
Q. Consider 2 stocks, A and B / assume there annual returns are jointly normally distributed , the marginal distribution of each stock has mean 2% AND STD deviation 10%. And correlation is 0.9 . What is the expected annual return of the stock A if the annual return of stock B is 3%?
a. 2%...
This is from Jorion 5th edition:
Q. Let N be n x 1 vector of independent draws from a std normal distribution, and let V be a covariance matrix of market time-series data. Then,if L is a diagonal matrix of eigen values of V,E is a matrix of the eight vectors of V and C’C is the cholesky...
EXAMPLE 15.7: FRM EXAM 1999—QUESTION 82
BankLondon with substantial position in five-year AA-grade Eurobonds has
recently launched an initiative to calculate 10-day spread VAR. As a risk
manager for the Eurobond trading desk you have been asked to provide an
estimate for the AA-spread VAR...
Hi David,
Below is the question from Jorion:
Q. Consider a portfolio with a one-day VAR of $1 million. Assume that the
market is trending with an autocorrelation of 0.1. Under this scenario, what
would you expect the two-day VAR to be?
a. $2 million
b. $1.414 million
c. $1.483 million...
Q. 15 the table below gives the closing prices and yields of a particular liquid bonds over past few weeks:
Day price yield
Mon 106.3 4.25%
Tue 105.8 4.20%
Wed 106.1 4.23%
What is the approx duration of the bond?
Ans.b
106.3-105.8/106.3/.0005=9.4...
Ohhh.. thats y I was wondering which one to take as q and which one as r...!!
My god... such small small technicalities and solid understanding is reqd..
Ur guidance is really very insightful...!!!
Thanks a lot.
BT rocks!!
-snigdha
David,
In above mail chain
26. Which of the following loans has the lowest credit risk?
Loan 1 Year Probability
of Default
Loss Give
Default
Remaining Term in
Months
whether this question above i.e concept of cumulative/marginal PD of default relates to l1.
I thought for L1 the...
Q. If the current USD/AUD rate is 0.6650 (1 AUD=0.6650USD) and the risk-free rates for the
USD and AUD are 1.0% and 4.5% respectively, what is the lower bound of a 5-month European
put option on the AUD with a strike price of 0.6880?
a. 0.0135
b. 0.0245
c. 0.0325
d. 0.0455
ANSWER: C...
Hi David,
I wanted to ask out of curosity that why is it that GARp has issued practise question 2010 and practise exam 2007? Why not '08 and '09?? do u have any any specific reason fot it in your mind??
Thanks
Snigdha
David,
Thanks For the wonderful reply.
I wish, I would have known about BT and your wisdom a bit sooner :(
Though I understood the explanation but I wanted to ask that whether the formula
(1 + riskless_rate)^2 = (1 + risky_rate)^2 * [cumulative prob of repayment + cumulative PD *...
David,
I guess , I do not have the rights to view that thread ...
Please,if u can copy the same here.I would be very grateful to you.
Thank you
snigdha
Hi david,
Here is a question from 2010 nov FRM practise questions issued by garp
Ref is : Arnaud de Servigny and Olivier Renault, Measuring and Managing Credit Risk
Q:A risk analyst seeks to find out credit linked yield spread on a BB rated ,2 yr zero copupn bond issued by a...
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