After all I got in to this mindset to see everything from Probability and Severity point of view… Given that severity of screwing (LGD) is 50% and that is a constant for all the questions, the only thing I am concerned is the Probability of something showing up in the exam. We will try to pick brain and collect items that you think every AFer should know cold. 1) a) VAR, VAR, VAR… b) LVAR c) delta-normal VAR d) SVAR 2) Find Credit Spread; EL, UL; UL of portfolio (given indiv UL); Economic capital 3) Quant - Probability; conditional 4) deriv: IRSwap payoff, value …
properties of variance/covariance…V(aX + bY) = a^2 Var(X) + b^2 Var(Y) +2Cov(X,Y) if not independent, etc.
Yeah… hits me Properties of Co-variance V(X+Y) = Var(X) + Var(Y) + 2Cov V(X-Y) = Var(X) + Var(Y) - 2Cov
Treynor sharpe or sortino or alpha or IR CAPM model Hedge ratios: beta or duration Any option strategy put call parity Duration or convexity calculation Normal distribution RAROC or ARAROC And BASEL II
CreditRisk+, Credit Metrics and KMV
Need to know recent events that is in the material. Bet this gets hit solid, along with Basel info.
Definitely 1) Var (Diversified), Undiversified Var, MVar, IVar, CVar (Expected shortfall or Expected Tail Loss) vs the “other” conditional Var (i.e., Var conditioned on other bank failures), Var with duration, Var underlying, portfolio Var, LVAR, Surplus at risk, Stress Var (SVAR) … did i miss any? 2) HR – duration, DV01 based, or beta one 3) Durations - effective, modified, macaulay, DV01, yield-based DV01 4) Basel II stuff: 3 pillars; tier 1,2,3, capital; market, credit, operational risks 5) EL, UL: PD (EDF), LGD (1-RR), AE (or EAD)
my friend took this last year, and all he remembered was VAR stuff on the exam… he said they had at least like 5 questions, so anything above in #1) is fair play.
how to calculate macaulay duration and how to convert to modified duration
What key matrix questions do you think might come up if any? This is by far my weakest area…