Blog Week in Risk (February 17th)

[David Harper CFA FRM]

New Practice Questions

• P1.T4.906. Annuities and yield to maturity (Tuckman Ch.3) https://trtl.bz/2I7W7sh
• P2.T9.906. The impact of fintech innovations on operations management, deposit services, and lending (Gomber) https://trtl.bz/2BvlYnZ

New YouTube

• How to interpret N(d1) and N(d2) in Black Scholes Merton (FRM T4-12) https://trtl.bz/2SBrP5W
• Option delta (FRM T4-13) https://trtl.bz/2GsVaZR I'm proud of this video! I actually recorded it twice. Delta is a fundamental idea that we've been talking about here for so long that it's a matter of reduction/simplification. But I think I conveyed the most important aspects of it.

In the forum

• [BT] An Open Letter to the Board of John Wiley & Sons with respect to Wiley's defamation of bionicturtle.com https://trtl.bz/2N8wZjM
• [P1.T1] Can we elaborate on the difference between an economic and accounting hedge? https://trtl.bz/2SFmvh6
• [P1.T1] What is the definition of network risk? https://trtl.bz/2SW9W11
• [P1.T2] Stressing out about Quant https://trtl.bz/2SRswYa
• [P1.T2] The standard error of the regression (SER) is a standard deviation around the regression line https://trtl.bz/2SMyLfH
• [P1.T2] Thank you @ericbmoreira for your attention to detail in regard to my typo https://trtl.bz/2SRJ56c
• [P1.T3] Covered call versus protective put https://trtl.bz/2N7rbqX
• [P1.T3] Bond convexity dynamics https://trtl.bz/2DDo32O
• [P1.T3] When exactly is it optimal to early exercise a call option on a dividend-paying stock https://trtl.bz/2SKg8co
• [P1.T3] What is the effect of measurement frequency on an Asian option? https://trtl.bz/2N9YppC
• [P1.T3] How did I price the (exotic) chooser option? https://trtl.bz/2Na8B19
• [P1.T4*] Derivation of duration as first derivative https://trtl.bz/2MXaqyt
• [P1.T4] A common way to test the Law of One price is to synthesize a bond coupon https://trtl.bz/2SLXzoh (also here https://trtl.bz/2SMQ6W4)
• [P2.T5] Explaining how the variance swap "pair trade" is buying correlation https://trtl.bz/2N9iBb6
• [P2.T5] More discussion on the spread change in equity tranche … https://trtl.bz/2SGCtHX
• [P2.T5] How the risk premium is incorporated in Tuckman's term structure model and why it's not added directly to the yield https://trtl.bz/2N9tycC
• [P2.T6] How can we understand the cumulative accuracy profile (CAP)? https://forum.bionicturtle.com/threads/credit-scoring.22144/
• [P2.T6] Why are netted positions inherently more volatility then their underlying gross positions? https://trtl.bz/2SMI8vR
• [P2.T6] Detail on computing the hazard rate from a CDS spread https://trtl.bz/2SOJiac

External

Banks, Banking and Macro

• We’re [NYSE] Suing the SEC to Protect the Stock Market https://trtl.bz/2SX8Y4H
• There’s Nothing Wrong With Stronger Banks https://trtl.bz/2N5izRn
• Expensive Loans to Desperate People Built This $90 Billion Industry https://trtl.bz/2NhsUKt
• The Hot Trade in the Housing Market: Servicing Your Mortgage https://trtl.bz/2NcawSS
• Securitisation: An Introduction https://trtl.bz/2NbRKev and Securitisation: Collateralised Loan Obligations (CLOs) https://trtl.bz/2NaHlQ9
• Libor’s Replacement Is a Little Too Real https://trtl.bz/2NaD4fL; The Benchmark Set to Replace Libor Suffers Volatility Spike https://trtl.bz/2N0AngL
• When Wall Street Is Your Landlord https://trtl.bz/2N8HCDc (I am LONG ….)
• The 7 Major Flaws of the Global Financial System https://www.visualcapitalist.com/7-major-flaws-global-financial-system/
• The U.S. Dollar’s Global Roles: Where Do Things Stand? https://trtl.bz/2SJR2dL "In sum, the period since the global financial crisis has not seen a widespread change in the international monetary architecture. While the dollar’s international status may have declined in some pockets, overall it remains dominant."
• Worry About Debt? Not So Fast, Some Economists Say https://trtl.bz/2ST1iR1

Risk

• [GARP] SEC’s Peirce: Fintech Is Risky, Get Used to It https://trtl.bz/2SWYUZn
• [GARP] Risk Management Lessons from the Wells Fargo Report https://trtl.bz/2SOQun1 Here is WFC's 100-page Business Standards Report https://trtl.bz/2DIMwma
• The Benchmark Set to Replace Libor Suffers Volatility Spike https://trtl.bz/2N0AngL
• Seven Questions for Understanding the Fundamentals of Risk Appetite https://www.erminsightsbycarol.com/risk-appetite-fundamentals/
• Top 3 Insights on the Operational Risk Management Software Market https://trtl.bz/2SVPIEE (ORM Software Report here https://trtl.bz/2IhbVZy)

Fintech and data science

• J.P. Morgan Creates Digital Coin for Payments https://www.jpmorgan.com/global/news/digital-coin-payments
• Data Science Foundations: Know your data. Really, really, know it https://trtl.bz/2SXaNP2
• Why Tech Companies Hire So Many Economists https://hbr.org/2019/02/why-tech-companies-hire-so-many-economists
• The bootstrap. The Swiss army knife of any data scientist https://trtl.bz/2T3c86O

Investing and Personal Finance

• Forget the 401(k). Let’s Invent a New Retirement Plan https://trtl.bz/2N4GMrk
• The New 1% Advisory Fee: 1% Of Income, Instead Of 1% Of Assets (Michael Kitces) https://trtl.bz/2SQ0nR6 Great inside peek into the current state of financial advisor economics
• The Elimination of Risk https://theirrelevantinvestor.com/2019/02/14/the-elimination-of-risk/
• This Options Bet Helps Tame Markets, but There Are Risks https://trtl.bz/2N4HcxU
• Jeffrey Gundlach extended conversation with Yahoo Finance https://trtl.bz/2SYZeqw
• What You Need to Know About the New Tax Law (Now That You’re Doing Your Taxes) https://trtl.bz/2SVPZaE (Guide is here https://trtl.bz/2Ie2tWW)
• [Book] Mastering the Market Cycle https://trtl.bz/2NaGxuL
• 2019 US Wealth Management Outlook: The Old Guard and Fintech Cozy Up (CFA Institute) https://trtl.bz/2NbQwQg
• [FSB] FinTech and market structure in financial services: Market developments and potential financial stability implications https://trtl.bz/2SVXAWx
• Auto Loans Are Not the Next Subprime https://trtl.bz/2T3c86O
• This Options Bet [i.e., writing options] Helps Tame Markets, but There Are Risks https://trtl.bz/2N4HcxU

Governance

• The Road Ahead for Shareholder Activism https://corpgov.law.harvard.edu/2019/02/13/the-road-ahead-for-shareholder-activism/
• US Corporate Governance: Turning Up the Heat (Harvard Law) https://trtl.bz/2SNmtUm "Public companies face traditional challenges regarding long-term financial performance and earnings growth, as well as newer ones presented by a range of topics that fall within the umbrella of environmental, social and governance, or ESG … The common denominator among all of these items is risk."

Other (interesting)

• Climate Change Still Seen as the Top Global Threat, but Cyberattacks a Rising Concern (Pew Research) https://trtl.bz/2SPZfwQ, and: Time to Panic https://trtl.bz/2SVIpNm which I wish featured more data for those of us who are trying to understand the topic better.
• How to build durable and long-lasting Atomic Habits https://radreads.co/atomic-habits-james-clear/
• Google’s Waymo risks repeating Silicon Valley’s most famous blunder https://trtl.bz/2SYC4k7
• Zillow Wants to Flip Your House https://trtl.bz/2Nb61Iq
• AR Will Spark the Next Big Tech Platform--Call it Mirrorworld https://www.wired.com/story/mirrorworld-ar-next-big-tech-platform/