MrDonadei Wrote: ------------------------------------------------------- > I’m 100% sure on this… the shortfall risk was > clearly wrong and the semivariance looked fine to > me 
and I work in risk 
agreed, that’s what I said… StD and Var were clearly correct. Semivariance wasn’t perfect but it was still ok… Shortfall risk is E[r]-2*S.D. so it doesn’t “measure the risk of not reaching a goal” or whatever they said…
equity_research_nds Wrote: ------------------------------------------------------- > PM Shortfall risk was wrong. The statement itself wasn’t even what shortfall risk measures. (i.e. the right answer)
csk and hala, I am not standing to strongly by my VAR answer, that seemed correct to me as well, just some minutiae in the wording felt weird on it. But as far as shortfall, I somewhat disagree with you, it does give you the number but that number is given with probability attached, so whever you do exp. retun - 2 std (assuming normal distribution), then you would say that the expected shortfall would be that number with 95% probability
i voted for shortfall risk also. it was not ‘$shortfall’ it was ‘shortfall risk’ if i recall. semivariance like variance, requires normal distn. VAR does too another sneaky one on PM…
shortfall risk is the probability that you will not reach your goal, which is pretty much what that statement said http://www.google.com/search?q=shortfall+risk&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
comp_sci_kid Wrote: ------------------------------------------------------- > it was shortfall 100% Correct.
The portfolio consisted of MBS if I recall correctly. Ask yourself, ‘Is Std. Dev (and for that matter, semivariance) ever a good measure of risk for MBS?’
How about the other question about whether the MBS exposed to call risk and cap risk. I picked both, not so sure.
ahahah Wrote: ------------------------------------------------------- > MrDonadei Wrote: > -------------------------------------------------- > ----- > > I’m 100% sure on this… the shortfall risk was > > clearly wrong and the semivariance looked fine > to > > me and I work in risk > > > agreed, that’s what I said… StD and Var were > clearly correct. Semivariance wasn’t perfect but > it was still ok… > > Shortfall risk is E-2*S.D. so it doesn’t “measure > the risk of not reaching a goal” or whatever they > said… who determined shortfall risk is 2 st dev?? you’re thinking VAR
Contingent claim risk, cap risk no for me.
emarkhans Wrote: ------------------------------------------------------- > Contingent claim risk yes, cap risk no for me.
bluelily Wrote: ------------------------------------------------------- > How about the other question about whether the MBS > exposed to call risk and cap risk. I picked both, > not so sure. i said no, no it’s subject to prepayment risk not call risk. certianly not cap risk.
check end of chapter questions, oskigo…
Semivariance is poor with skewed returns; moreover, if returns are normally distributed it offers the same information as standard deviation.
straight from CFAI text V4, pg 13: 1. Semivariance “Deficiency: To the extent that returns may not be symmetric, return asymmetries are very difficult to forecast and may not be a good forecast of future risk anyway” 2. Shortfall risk “refers to the probability of not achieving some specified return target” 3. Value at Risk “is an estimate of the loss (in money terms)…” I picked semivariance because it seemed the least right. although the statement seems to imply you CAN use it for asymmetric returns, just that it’s not preferred.
Call risk wasn’t the choice. It was “contingent claim” risk, which an MBS clearly is unless my brain’s gone completely haywire.
I still think all are correct although I went to Semi.
hala_madrid Wrote: ------------------------------------------------------- > check end of chapter questions, oskigo… bleh great. -1
contingent claim is just a fancy term for call risk
emarkhans Wrote: ------------------------------------------------------- > Call risk wasn’t the choice. It was “contingent > claim” risk, which an MBS clearly is unless my > brain’s gone completely haywire. contingent claim risk is the same as call risk