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Market Risk Measurement and Management

Back testing VAR - Unconditional LR


I am not able to calculate LR with the equation as values are gettung too high.

For example, (1-p)252-n

Calculator is not able to calculate this value

Any suggestions?


050 2422349

Reading 6 (Correlation basics...) LO 6.d - Risk Management (Schweser Book 1, Page no 73)

Standard deviation of the portfolio = (Bh X C X By)

Above formula is given in the reference topic, however inputs are the same as a normal calculation for standard deviation using weights.

I am not able understand, how to identify which formula to use - I mean in exam, when we see inputs for standard deviation calculation, we will tend to use the formula with weights.

Any solution/thoughts?

VaR Forward Bond

Hi, I hope you are keeping well.

Any hint in order to calculate a historical Value at Risk of Forward Bond (Goverment Bond 5 years, Bullet semmi-annual, Forward 3 Months)?.

Please your support.

Many thanks!


FRM L2 Preparation for May'19 Attempt..

Hi Guys,

Just passed L1, Any idea on how to go about for L2 preparation for May’19 attempt? study grp would be good…any1?

Any idea on coaching for FRM L2 in Bangalore? what are the options and which 1 is the best?




Delta Hedging a short call with a long stock

I’m having trouble understanding the following statement

“If the delta of a call option is 0.4, then in order to hedge the sold call option, the option seller needs to purchase 0.4 stocks for every option sold”

I understand the math behind delta. What I don’t understand is, why does someone hedge a sold call? (While the call itself is a hedge)

Is it to be able to close the short call position and exit their obligation in the event that the spot price of the underlying far exceeds the strike price? 

what rate of return to use in Monte Carlo Sim

Hi All, I have been reading for days trying to get to the bottom of this question, however I don’t have a solid enough math background to reach the answer. I want to simulate the performance of an asset and I am assuming it is normally distributed and it will behave in a similar manner in the future.

1-) Take the daily changes in an assets price

2-) Apply natural log on those price (LN)

3-) Calculate the Average and Sd of (2)

4) Multiple the average by 250 to arrive at the annual expected return and Sd by Sqrt(250) to arrive at annual volatility

Joint Probability With Hazard Rate

Hello, I found out two different methods to calculate the probability: Here you are the question and answer:

Question 1:

Lognormal Var Formula Question

Hello, I’m confused about a very easy question, how to calculate the lognormal Var. Here you are the question and answer:

Question about the 2009 practice exam 2, question 1.

The answer is B. However, I don’t think this is the right answer. My calculation is as follows:

Assuming we should buy x contracts,


That is, x=-1153.

It will be grateful if anyone could point out my mistake in calculation.