FRM 2007 LOs_sortByLO
|
|
|
|
Reading
|
Learning Outcome
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.1: Define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.2: Discuss the two defining properties of probability.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.3: Compare and contrast unconditional and conditional probabilities.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.4: Define joint probability and interpret the joint probability of any number of independent events.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 1.5: Apply the three theorems on expectations for two independent variables.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 1.6: Apply the four theorems on variance for two independent variables.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 1.7: Define and calculate covariance and correlation.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.8: Use Bayes’ formula to determine the probability of causes for a given event.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.9: Determine the number of possible permutations of n objects taken r at a time and the number of possible combinations of n objects taken r at a time.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.1: Distinguish between discrete random variables and continuous random variables and contrast their probability distributions.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.2: Discuss a probability function, a probability density function, and a cumulative distribution function.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.3: Describe a discrete uniform random variable and a binomial random variable.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.4: Describe the continuous uniform distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.5: Identify the key properties of the normal distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.6: Calculate probabilities based on a standard normal distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.7: Calculate the expected value and variance of the Poisson distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.8: Compare and contrast the binomial, normal, and Poisson distributions.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.9: Contrast the lognormal and normal distributions.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.1: Define a population, a parameter, and a sample.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.2: Construct a frequency distribution, calculate relative frequencies from a frequency distribution, and illustrate the use of a histogram and a frequency polygon to the present data.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.3: Calculate and interpret the following measures: population mean, sample mean, arithmetic mean, geometric mean, mode, and median.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.4: Discuss the properties of the sampling distribution of means, proportions, and differences and sums.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.5: Calculate a sample variance, population variance, and standard deviation.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 3.6: Determine the percentage of a distribution that lies a stated number of deviations from the mean using Chebyshev’s inequality.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 3.7: Describe and interpret measures of skewness and kurtosis.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.1: Define simple random sampling and stratified random sampling and discuss sampling error.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.2: State the central limit theorem and describe its importance.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.3: Calculate and interpret the standard error of the sample mean.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.4: Compare and contrast a point estimate with a confidence interval.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.5: Identify and describe the properties of an efficient estimate.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.6: Calculate and interpret a confidence interval for a population mean, given a normal distribution with a known and unknown population variance.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.7: Calculate a confidence interval for a proportion and for differences and sums.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.1: Explain the difference between a Type I and a Type II error and how the probabilities of Type I and Type II errors are affected by the choice of significance level.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.2: Define the p-value in hypothesis testing.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.3: Determine the appropriate test statistic for both a known and unknown variance of a normally distributed population mean.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.4: Construct a hypothesis and determine whether it should be rejected.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.5: Determine whether two population means are statistically different from each other, assuming each population is normally distributed.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.6: Conduct a chi-square test for a single population variance and an equality-of-variance test for two normally distributed populations.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.1: Calculate the standard error of estimate.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.2: Calculate the coefficient of determination.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.3: Conduct a test for significance for regression coefficients, and construct a corresponding confidence interval.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.4: Calculate a predicted value for the dependent variable, given output from a regression model and stated values for independent variables.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.5: Calculate the covariance between two random variables and the covariance for two dependent variables.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.6: Calculate a correlation coefficient, and determine whether it is significantly different from zero.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.1: Discuss reasons for the widespread adoption of VAR as a measure of risk.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.2: Define value at risk and calculate VAR for a single asset on both a dollar and percentage basis.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.3: Convert a daily VAR measure into a weekly, monthly, or annual VAR measure.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.4: Discuss assumptions underlying VAR calculations.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.5: Explain why it is best to use continuously compounded rates of return when calculating VAR.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.6: Calculate portfolio VAR and describe the primary factors that affect portfolio risk.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.7: Differentiate between linear and non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.8: Describe the calculation of VAR for a linear derivative.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.9: Explain how the addition of second-order terms through the Taylor approximation improves the estimate of VAR for non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.10: Discuss why the Taylor approximation is ineffective for certain types of securities.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.11: Explain the differences between the delta-normal and full-revaluation methods for measuring the risk
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.12: Describe the structured Monte Carlo approach to measuring VAR, and identify the advantages and disadvantages of the SMC approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.13: Discuss the implications of correlation breakdown for scenario analysis.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.14: Describe the primary approaches to stress testing and the advantages and disadvantages of each approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.15: Describe the worst case scenario measure as an extension to VAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.1: Calculate cash flow at risk for a firm with normally distributed cash flows for any period, given the expected return and volatility of firm value, and interpret the CFAR measure.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.2: Describe the characteristics of firms for which either VAR or CFAR is the more appropriate measure of risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.3: Given the cost per dollar of VAR and the relevant betas, expected returns, and correlations, calculate the VAR impact and expected net gain of a project/trade that is not large relative to the firm’s portfolio of projects.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.4: Evaluate the impact of a project that is large relative to the firm’s portfolio of projects on CFAR, and explain how the cost of additional CFAR impacts the capital budgeting decision.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.5: Explain how to allocate CFAR and VAR to the existing activities of the firm and how to use these allocations to improve the evaluation of the economic profitability of these activities (projects, divisions, and trading).
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.6: Discuss how a firm can reduce the cost of VAR/CFAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.7: Explain the limitations on project selection and the use of derivative instruments as ways to decrease VAR/CFAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.1: With respect to portfolio risk analysis, define diversified portfolio VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.2: With respect to portfolio risk analysis, define individual VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.3: For a two-asset portfolio, calculate the portfolio VAR when the returns of the two assets have a zero correlation and when the correlation is one (perfectly correlated).
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.4: Calculate the standard deviation and VAR of an equally weighted portfolio of assets whose returns all have the same standard deviation and where the correlations of the returns are all equal for each pair of assets.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.5: With respect to portfolio risk analysis, define marginal VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.6: With respect to portfolio risk analysis, define and calculate incremental VAR, explain why calculating incremental VAR may be difficult, and give a useful approximation.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.7: With respect to portfolio risk analysis, define the variance minimizing allocation or “best hedge” when adding a single risk factor to a portfolio.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.8: Estimate component VAR in a portfolio with a large number of positions and use it to decompose VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.9: Describe ways we can compute component VARs for a distribution of returns that is not normal or elliptical.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.10. Demonstrate how a manager can manage risk by using marginal VARs to make decisions to lower portfolio VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.11. Explain the difference between risk management and portfolio management, and demonstrate how to use marginal VAR in portfolio management.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.1: Explain how outliers can really be indications that the volatility varies with time.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.2: Explain how to construct a moving average forecast.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.3: Explain how the GARCH estimations can provide forecasts that are more accurate.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.4: Explain how persistence is related to the reversion to the mean.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.5: Explain how an EWMA systematically discounts older data, and identify the RiskMetrics® daily and monthly decay factors.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.6: Explain why forecasting correlations can be more important than forecasting volatilities.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.7: Explain how to use option prices to derive forecasts of volatilities and correlations.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.1: Identify the ways that distributions of asset returns tend to deviate from a normal distribution.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.2: Discuss potential reasons for the existence of “fat tails” in a return distribution and the implications of “fat tails” for analyzing distributions of asset returns.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.3: Discuss the implications of regime switching for quantifying volatility.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.4: Explain the various approaches for estimating VAR.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.5: Compare and contrast parametric approaches for estimating conditional volatility, including the historical standard deviation approach, the RiskMetrics® approach, and the GARCH approach.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.6: Discuss the advantages and disadvantages of nonparametric methods for forecasting volatility, including the historic simulation, multivariate density estimation, and hybrid methods.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.7: Explain return aggregation in the context of volatility forecasting methods.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.8: Explain how implied volatility can be used as a predictor of future volatility, and discuss the advantages and disadvantages of using implied volatility to predict future volatility.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.9: Discuss the implications of mean reversion in returns and return volatility for forecasting VAR over long time horizons.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.10: Discuss the implications of using nonsynchronous data for estimating correlations, and describe ways to mitigate the impact of nonsynchronous data when estimating risk.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.1: Explain the difference between local- and full-valuation methods.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.2: Describe how the addition of second-order terms improves the accuracy of estimates for nonlinear relationships.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.3: Compare the delta normal, historical simulation, and Monte Carlo simulation methods, and explain their appropriate uses.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.4: List the advantages and disadvantages of the delta-normal model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.5: List the advantages and disadvantages of the historical simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.6: List the advantages and disadvantages of the Monte Carlo simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.1: Describe the two components of the typical VAR model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.2: Discuss the three qualities of successful futures contracts and why these are desired in the chosen risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.3: Discuss how the residual specific risk is related to the number of risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.4: Explain the three approaches for mapping a portfolio onto the risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.5: Decompose a fixed-income portfolio into positions in the standard instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.6: Calculate the VAR of a fixed-income portfolio using the delta-normal method, given the expected change in portfolio value and the standard deviation.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.7: Explain why the delta-normal method can provide accurate estimates of VAR for many types of financial instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.8: Discuss why caution must be used in applying delta-normal VAR methods to derivatives and options, and describe when this is appropriate.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.9: Explain what is meant by benchmarking a portfolio, and define tracking error.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.1: Describe the procedure for simulating a price path using a discrete approximation to geometric Brownian motion.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.2: Identify the four steps in computing VAR using Monte Carlo simulation.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.3: Describe how the Monte Carlo method is used in option pricing.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.4: Discuss the tradeoff between speed and accuracy in Monte Carlo models.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.5: Explain how to account for correlations among the variables in simulations with multiple variables.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.6: Describe two techniques used to simplify the simulation process in simulations with multiple variables.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.7: Describe various models of interest rate dynamics.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.1: Discuss the role of stress testing as a complement to the VAR measure, and describe the benefits and drawbacks of stress testing.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.2: Compare and contrast the use of unidimensional and multidimensional scenario analysis.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.3: Compare and contrast the use of prospective scenarios and historical scenarios in multidimensional scenario analysis, and describe the advantages and disadvantages of each.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.4: Discuss an advantage and disadvantage of using the conditional scenario method as a means to generate a prospective scenario.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.5: Discuss possible responses when scenario analysis reveals unacceptably large stress losses.
|
|
L. Kalyvas, Extreme Value Theory
|
LO 16.1: Describe the problem with VAR estimation for which extreme value theory provides a potential solution.
|
|
L. Kalyvas, Extreme Value Theory
|
LO 16.2: Discuss the advantages and disadvantages of the block maxima and peaks-over-threshold approximations for extreme value theory.
|
|
L. Kalyvas, Extreme Value Theory
|
LO 16.3: Discuss the importance of tail size and time dependency in the application of extreme value theory.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.1: Define risk budgeting.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.2: With respect to VAR and managing risk on the “buy side” and “sell side” of the investment industry, compare the following characteristics: horizon, turnover, leverage, risk measures, and risk controls.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.3: Summarize the two basic steps of the investment process, and explain two trends in the investment process that have led to a greater need for dynamic risk management. LO 17.4: With respect to hedge funds, explain why risk measurement problems exist. LO 17.5: With respect to investment managers, explain absolute versus relative risk and distinguish between policy mix and active risk. LO 17.6: Explain how VAR can apply to funding risk, and calculate the negative surplus associated with a VAR level of loss. LO 17.7: Define plan sponsor risk and distinguish between economic risk and cash flow risk. LO 17.8: Explain how to use VAR to monitor risk and why it is important in a large firm. LO 17.9: With respect to risk management, explain the pros and cons of having a global custodian. LO 17.10: Discuss the trend towards risk management systems by money managers. LO 17.11: Explain how to use VAR to design better investment guidelines and how to use VAR for the investment process. LO 17.12: Explain how to budget risk across asset classes. LO 17.13: Explain how to budget risk across active managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.4: With respect to hedge funds, explain why risk measurement problems exist.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.5: With respect to investment managers, explain absolute versus relative risk and distinguish between policy mix and active risk.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.6: Explain how VAR can apply to funding risk, and calculate the negative surplus associated with a VAR level of loss.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.7: Define plan sponsor risk and distinguish between economic risk and cash flow risk.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.8: Explain how to use VAR to monitor risk and why it is important in a large firm.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.9: With respect to risk management, explain the pros and cons of having a global custodian.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.10: Discuss the trend towards risk management systems by money managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.11: Explain how to use VAR to design better investment guidelines and how to use VAR for the investment process.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.12: Explain how to budget risk across asset classes. LO 17.13: Explain how to budget risk across active managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.13: Explain how to budget risk across active managers.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.1: Define market risk.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.2: Describe five reasons why market risk measurement is important.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.3: List the models being used to calculate market risk exposure.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.4: List the methods the Bank for International Settlement uses to regulate market risks.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.1: Describe the different sources of foreign exchange risk exposure.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.2: Explain the different types of foreign trading activities and the sources of most profits and losses on foreign exchange trading.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.3: Describe foreign exchange exposure resulting from mismatches between foreign financial asset and liability portfolios, and explain how returns and risks of foreign investing can impact returns.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.4: Explain on-balance-sheet hedging.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.5: Explain off-balance-sheet hedging with forwards.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.6: Explain why diversification in multicurrency foreign asset-liability positions could reduce portfolio risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.7: Distinguish among transaction exposure, contractual exposure, and competitive exposure to exchange rate fluctuations.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.8: Explain the interaction of price risk and quantity risk in terms of the additional challenges to hedging using examples of industries where the association between price and quantity of the risky factor is negative and where it is positive.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.9: Explain the implications of perfect positive correlation, zero correlation, and perfect negative correlation between price risk and quantity risk for the optimal hedge ratio and the risk of the hedged versus the unhedged cash flows.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.10: Describe how the exposure of cash flow to a risk factor, such as exchange rate risk, is measured.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.11: Using supply (marginal cost) and demand analysis, illustrate the competitive exposure to exchange rate risk for an exporting firm, considering changes in (i) exchange rates between the firm’s currency and the currency of the importing country and (ii) exchange rates between the currency of a third country (that has exporters that compete with the firm) and the currency of the importing country.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.12: Outline the steps in determining cash flow exposure from a pro forma analysis when the correlation of the quantity sold with the risk factor is zero, positive, and negative.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.13: Explain how the optimal hedge ratio is determined in the context of pro forma cash flow analysis with one risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.14: Illustrate the concept of the delta exposure of cash flow, and describe how it is estimated in practice for non-linear exposure to a risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.15: Describe the steps in using Monte Carlo simulation to estimate the volatility-minimizing hedge ratio and the circumstances under which this approach has significant advantages.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.1: Explain the interrelationship between funding liquidity risk and market liquidity risk.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.2: Describe alternative methods for measuring liquidity risk.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.3: Discuss factors that impact an asset’s liquidation cost.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.4: Discuss problems with using the bid-ask spread as a measure of liquidity.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.5: Calculate liquidity-adjusted VAR.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.6: Discuss ways firms can minimize their exposure to liquidity risk.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 21.1: Compare and contrast the structure of Treasury coupon bonds and Treasury STRIPS, and differentiate between P-STRIPS and C-STRIPS.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.2: Calculate a bond’s yield to maturity (YTM) using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.3: Calculate the price of an annuity and a perpetuity using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.4: Describe the price of a bond relative to its par value when (i) coupon rate = YTM, (ii) coupon rate > YTM, and (iii) coupon rate < YTM.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.5: Calculate the accrued interest and invoice price on a coupon bond.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.6: Calculate simple, semiannual, monthly, daily, and continuously compounded rates given a discount factor or market interest rate for a specified interval.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 22.1: Generate the discount function given a series of coupon bond prices.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.2: Calculate a series of spot rates given the appropriate discount factors or STRIPS prices.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.3: Calculate forward rates from a series of spot rates.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.4: Calculate the price of a bond using discount factors, spot rates, or forward rates.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.5: Describe the arbitrage trade necessary to exploit violations of the law of one price, and compute the profit or loss of the arbitrage strategy.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.6: Use the discount function to determine whether a bond is trading cheap or rich.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 22.7: Explain the linear yield interpolation and piecewise cubic methods for estimating complete discount functions.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.1: Calculate the dollar value of an 01 (DV01) of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.2: Calculate the face amount of one security required to hedge a position in a second security, given the DV01 of each.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.3: Calculate and interpret the effective duration of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.4: Calculate and interpret the convexity of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.5: Estimate the price change of a security given the DV01, the duration, and the convexity.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.6: Interpret convexity in the contexts of investment management and asset-liability management.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.7: Calculate the duration of a portfolio.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.8: Interpret the impact of changes in maturity, yield, and rating on a bond’s duration.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.9: Define, interpret, and calculate the yield-based DV01, the modified duration, and the Macaulay duration of a security.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.10: Explain how Macaulay duration and DV01 vary with changes in coupon rate, maturity, and yield.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.11: Explain how yield-based convexity changes for changes in maturity.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.12: Describe the construction of a barbell and a bullet portfolio, and compare and contrast the convexity of the two portfolios.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.1: Describe the major weakness attributable to single-factor approaches when hedging portfolios or implementing asset liability techniques.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.2: Define the key rate shift technique in multifactor hedging applications, and discuss four appealing characteristics of this approach.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.3: Calculate the key rate exposures for a given security.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.4: Calculate the appropriate hedging positions required given a specific key rate exposure profile.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.5: Discuss why hedges based on key rates only approximate an immunized position in the underlying assets.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.6: Explain the main differences between using the key rate shift approach and the bucket shift approach for managing interest rate risks.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.7: Explain how key rate and bucket analysis may be applied in estimating portfolio volatility.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.1: Calculate the value of a derivative on a fixed-income security, given an interest rate tree and the risk-neutral probabilities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.2: Discuss the advantages and disadvantages of reducing the size of the time steps.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.3: Explain why the Black-Scholes-Merton model is not appropriate for valuing derivatives on fixed-income securities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.4: Explain the impact of embedded options on a fixed-income security’s price.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.1: Describe the basic features of a fixed rate, level payment mortgage, including the prepayment option.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.2: Discuss the factors that affect mortgage prepayments.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.3: Discuss the advantages and disadvantages of static cash flow models, implied models, and prepayment models.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.4: Describe the characteristics of the price-rate curve of a mortgage pass-through security.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.5: Describe the prepayment risk of planned amortization class (PAC) bonds, support bonds, principal only (PO) strips, and interest only (IO) strips.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.6: Describe the Monte Carlo simulation method for valuing mortgage-backed securities.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.1: State and explain the cost-of-carry model for forward prices using both assets that have interim cash flows and assets that do not have interim cash flows.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.2: Compute the forward price given both the price of the underlying and the appropriate carrying costs of the underlying.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.3: Calculate the value of a forward contract.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.4: Describe the differences between forward and futures contracts.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.5: Distinguish between a long futures position and a short futures position.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.6: Describe the characteristics of a futures contract and explain how futures positions are settled.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.7: Describe the marking-to-market procedure, the initial margin, and the maintenance margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.8: Compute the variation margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.9: Explain the role of the clearinghouse.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.1: Differentiate between a short hedge and a long hedge, and identify situations where each is appropriate.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.2: Define and calculate the basis.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.3: Define the types of basis risk and explain how they arise in futures hedging.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.4: Define, calculate, and interpret the minimum variance hedge ratio.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.5: Calculate the number of stock index futures contracts to buy or sell to hedge an equity portfolio or individual stock.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.6: Identify situations when a rolling hedge is appropriate, and discuss the risks of such a strategy.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.1: Identify and apply the three most common day count conventions.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.2: Explain the U.S. Treasury bond (T-bond) futures contract conversion factor.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.3: Calculate the Eurodollar futures contract convexity adjustment.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.4: Formulate a duration-based hedging strategy using interest rate futures.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.5: Identify the limitations of using a duration-based hedging strategy.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.1: Explain the derivation of the basic equilibrium formula for pricing commodity forwards and futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.2: Define lease rates, and discuss the importance of lease rates for determining no-arbitrage values for commodity futures and forwards.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.3: Explain how lease rates determine whether a forward market is in contango or backwardation.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.4: Explain how storage costs impact commodity forward prices, and calculate the forward price of a commodity with storage costs.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.5: Explain how a convenience yield impacts commodity forward prices, and determine the no-arbitrage bounds for the forward price of a commodity when the commodity has a convenience yield.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.6: Discuss the factors that impact the pricing of gold, corn, natural gas, and oil futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.7: Describe and calculate a commodity spread.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.8: Define basis risk, and explain how basis risk can occur when hedging commodity price exposure.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.9: Differentiate between a strip hedge and a stack hedge.
|
|
Hull, Chapter 7, Swaps
|
LO 31.1: Illustrate the mechanics and compute the cash flows of a plain vanilla interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.2: Explain how an interest rate swap can be combined with an existing asset or liability to transform the interest rate risk.
|
|
Hull, Chapter 7, Swaps
|
LO 31.3: Explain the advantages and disadvantages of the comparative advantage argument often used for the existence of the swap market.
|
|
Hull, Chapter 7, Swaps
|
LO 31.4: Explain how the discount rates in a swap are computed.
|
|
Hull, Chapter 7, Swaps
|
LO 31.5: Explain how a swap can be interpreted as two simultaneous bond positions or as a sequence of forward rate agreements (FRAs).
|
|
Hull, Chapter 7, Swaps
|
LO 31.6: Calculate the value of an interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.7: Explain the mechanics and calculate the value of a currency swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.8: Explain the role of credit risk inherent in an existing swap position.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.1: Explain the specifications of exchange-traded stock options including strike, expiration dates, terminology, dividend and stock split adjustments, and position limits.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.2: Describe a flex option and long-term equity anticipation securities (LEAPS®).
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.3: Explain why margin is required for the writer of options but not for owners of options.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.4: Explain the differences between exchange-traded options and warrants, executive stock options, and convertible bonds.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.1: Identify the six factors that affect an option’s price.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.2: Explain how the six factors affect an option’s price for both European and American options.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.3: Identify upper and lower bounds for option pricing.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.4: Explain put-call parity and use it to compute option values.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.5: Explain the difference between a European and American call on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.6: Contrast and explain the early exercise features of American call and put options on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.7: Explain the relationship between the prices of American call and put options on a nondividend-paying stock within the context of a put-call parity relationship.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.1: Calculate the value of a European call or put option using a one-step and a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.2: Calculate the value of an American call or put option using a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.3: Discuss how the binomial model value converges as time periods are added.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.4: Identify the assumptions underlying the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.5: Compute the value of a European option using the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.6: Discuss how cash flows affect the pricing of an option.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.7: Identify the methods for estimating future volatility.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.1: Explain how put-call parity indicates that the same implied volatility used to price calls is the one used to price puts.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.2: Explain why a volatility smile may exist in foreign currency options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.3: Explain why a volatility smile may exist in equity options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.4: Describe how the volatility term structure and volatility surfaces may be used when pricing options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.5: Describe how the volatility smile affects calculation of option Greeks.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.6: Discuss how the implied volatility of an option might be affected by jumps in asset prices.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.7: Discuss the general empirical testing results of the Black-Scholes-Merton option pricing model.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.1: Illustrate and explain why an investor would write a covered call or a protective put strategy.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.2: Illustrate and explain why an investor would enter into a spread strategy (e.g., bull spread, bear spread, calendar spread, or butterfly spread).
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.3: Illustrate and explain why an investor would enter into a combination strategy (e.g., straddles, strangles, strips, or straps).
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.1: Discuss the risks of naked and covered positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.2: Describe how naked and covered positions can be used to generate a stop-loss trading strategy.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.3: Describe the characteristics of delta hedging for option, forward, and futures contracts, and discuss the dynamic aspects of delta hedging.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.4: Define the delta of a portfolio.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.5: Define and discuss “theta” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.6: Define and discuss “gamma” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.7: Describe how to create and maintain a gamma-neutral position.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.8: Discuss the relationship between delta, theta, and gamma.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.9: Define and discuss “vega” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.10: Define and discuss “rho” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.11: Describe how hedging activities take place in practice, and discuss how scenario analysis can be used to formulate expected gains and losses with option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.12: Define and discuss how portfolio insurance can be created through option instruments and stock index futures.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.1: Define exotic derivatives, and briefly describe the four primary issues to be considered when evaluating alternative approaches to taking a position in exotic derivatives.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.2: Define and illustrate the use of packages in formulating a zero-cost product.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.3: List and describe how various option characteristics can transform standard American options into nonstandard American options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.4: Describe the characteristics of forward start options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.5: Describe how compound options are created.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.6: Discuss the characteristics of a chooser option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.7: Describe the characteristics of barrier options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.8: Describe how binary options generate discontinuous payoff profiles.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.9: Discuss the various factors affecting lookback options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.10: Describe the characteristics of a shout option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.11: Describe an Asian option, and discuss the factors impacting Asian options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.12: Describe the workings of options used to exchange one asset for another.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.13: Define basket options.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.14: Discuss the issues impacting hedging concerns when dealing with exotic options, and explain the use of static option replication in hedging exotic options.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.15: Compare and contrast exchange-traded options, over-the-counter options, dynamic replication, and static replication in regard to their advantages, costs, and risks to the user.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.16: Discuss the various roles that financial intermediaries can take with respect to the derivative products they sell in terms of their risk position and comparative advantage.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.17: Explain how financial engineering and innovation in derivative products can solve risk management problems, and the role of competition in the profitability and availability of new products.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.18: Discuss the reasons that some derivatives are embedded in other securities or bundled with other derivatives.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.19: Given the tradeoffs involved in selecting the optimal derivative instrument or replicating strategy, provide a framework for selecting the optimal instrument or strategy to hedge a particular risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.1: Describe how the covariance/correlation of returns between securities affects the returns distribution of a portfolio of securities.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.2: Describe the efficient frontier and the asset allocation decision both with and without the presence of a riskless asset.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.3: Summarize the concepts of beta, the security market line (SML), and the capital asset pricing model (CAPM), and describe how they are related to the determination of the expected return of a security or portfolio of securities.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.4: List the CAPM’s underlying assumptions.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.5: Explain the price of risk, the quantity of risk (beta), and equilibrium theory.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.6: Define market efficiency, identify the three forms of market efficiency, and discuss the link between efficiency and the CAPM.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 40.1: Explain why strategies that reduce the firm’s diversifiable risk do not increase firm value.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 40.2: Differentiate between firm strategies and policies to reduce the firm’s systematic risk that will increase firm value and those that will not.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 40.3: Using the concepts of arbitrage and investor hedging, demonstrate that hedging a firm’s price risk with respect to its output will not affect firm value
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.4: Explain the circumstances under which risk management can reduce the present value of potential costs of financial distress.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.5: Explain why risk management may lower a firm’s tax bill, incorporating the ideas of tax carryforwards and carrybacks.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.6: Demonstrate how risk management may increase firm value by changing the optimal capital structure of the firm.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.7: Describe the circumstances under which the value of the firm may be increased or decreased by risk reduction that benefits a large shareholder.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.8: Explain the relationship between risk management, managerial incentives, and the structure of management compensation.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.9: Describe debt overhang, and explain how risk management can increase firm value by reducing the probability of debt overhang.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.10: Explain how risk management can reduce the problem of information asymmetry and increase firm
|
|
N. Amenc, Portfolio Theory, Chapter 4 (CAPM)
|
LO 41.1: Calculate, compare, and evaluate the Treynor measure, the Sharpe measure, and Jensen’s alpha.
|
|
N. Amenc, Portfolio Theory, Chapter 4 (CAPM)
|
LO 41.2: Discuss extensions to Jensen’s alpha.
|
|
N. Amenc, Portfolio Theory, Chapter 4 (CAPM)
|
LO 41.3: Calculate and interpret tracking error, the information ratio, and the Sortino ratio.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.4: Compare and contrast the characteristics of arbitrage and empirical multifactor models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.5: Compare and contrast the explicit and implicit factor methods for determining factors in multifactor models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.6: Identify and discuss three categories of multifactor models, and describe how multifactor models can be applied to international portfolios.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.7: Discuss the application of multifactor models to portfolio risk analysis, and describe examples of multifactor risk models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.8: Discuss the application of multifactor models to portfolio performance decomposition, and describe examples of multifactor performance analysis models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.9: Compare and contrast returns-based style analysis models with portfolio-based style analysis models.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.10: Identify and discuss two alternatives for modeling a yield curve.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.11: Discuss direct and indirect methods for estimating a range of zero-coupon rates given yields to maturity.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.12: Describe dynamic interest rate models used to estimate a yield curve including the Vasicek model, the Cox-Ingersoll-Ross model, and the Heath-Jarrow-Morton model.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.13: Identify the two primary risks that explain the variation in bond returns, and describe quantitative models used to assess each of these risks.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.14: Describe various strategies employed for managing fixed-income portfolios.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.15: Identify and describe models used to analyze and decompose fixed-income portfolio performance.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.1: Describe an equity long/short strategy and discuss its major determinants of return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.2: Describe an equity market-neutral strategy, define pair trading, and identify examples of market inefficiencies exploited by market-neutral hedge fund managers.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.3: Describe an equity market timing strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.4: Describe a short-selling strategy and discuss issues specific to short-selling managers.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.5: Describe a convertible arbitrage strategy and identify and describe three potential sources of return from a convertible arbitrage strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.6: Describe the various forms of a fixed-income arbitrage strategy and its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.7: Describe a volatility arbitrage strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.8: Describe a capital structure arbitrage strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.9: Identify types of event-driven strategies.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.10: Describe a merger arbitrage strategy and its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.11: Describe a distressed securities strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.12: Describe a Regulation D strategy and identify its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.13: Describe a global macro strategy and identify its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.14: Differentiate between a systematic and discretionary managed futures strategy and describe trend following as a systematic managed-futures strategy.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 42.15: Discuss the general structure and objective of a fund of hedge funds, explain how it can be classified according to diversification characteristics, and discuss considerations for strategy allocation in a fund of hedge funds.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.1: Discuss the challenges of benchmarking alpha returns.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.2: Explain the problems with existing hedge fund indices.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.3: Identify the attributes of a good hedge fund index.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.4: Discuss considerations for creating a more useful hedge fund index.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.5: Discuss how a trend-following strategy and a convergence strategy can be represented through a combination of options.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.6: Identify the five primary HFR fixed-income index categories, and discuss characteristics of each.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.7: Discuss actual and hypothetical performance of fixed-income hedge funds during market extremes.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.8: Discuss implications of identifying fixed-income hedge fund asset-based style factors for investors, counterparties, and regulators.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.1: Identify and discuss the types of risk faced by a fund of hedge funds.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.2: List primary risk factors for various examples of hedge fund strategies.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.3: Discuss the role of leverage in defining the risk profile of a hedge fund.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.4: Discuss the issue of hedge fund transparency as it pertains to the risk and return goals of an investor.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.5: Identify two components of proactive risk management, and discuss how each component addresses a fund of hedge fund’s generic risk.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.6: Discuss how ongoing risk monitoring and management should be applied at the investment and portfolio levels of a fund of hedge funds.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 27 (Style Drifts)
|
LO 44.7: Discuss the differences in how investment style is assessed between hedge funds and traditional long-only investments.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 27 (Style Drifts)
|
LO 44.8: Define the concept of style drift as it pertains to hedge funds and the importance of style drift monitoring for hedge fund investors.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 27 (Style Drifts)
|
LO 44.9: Discuss the reasons why hedge fund managers may drift from their styles and approaches for monitoring and detecting style drift.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.1: Compare the economic function of mutual funds and hedge funds and the most basic choices the funds make in achieving that function.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.2: Compare the size of hedge funds and mutual funds and give the reason for the difference in size.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.3: Explain how hedge funds are usually organized and how the organization can help avoid regulation.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.4: Explain the distinction between symmetric compensation and asymmetric compensation and how they apply to the fees paid to the managers of mutual funds and hedge funds.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.5: Describe typical restrictions that hedge fund investors face with respect to withdrawing capital from the fund.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.6: With respect to diversification, explain why it is especially important when investing in hedge funds, and give two reasons why it is difficult.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.7: With respect to diversification, explain how a fund-of-funds can help a hedge fund investor and how hedge funds prove to be a useful tool in a larger portfolio.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.8: Discuss how hedge funds might make markets more efficient.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.9: Compare the returns and volatility of the Credit Suisse/Tremont Hedge Fund index to that of the S&P 500, and the growth of investments in hedge funds to that in mutual funds.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.10: List and explain four reasons why it is difficult to ascertain if individual hedge funds provide a positive abnormal risk-adjusted return.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.11: Cite evidence that hedge funds managers massage their reported returns.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.12: Discuss the alpha of hedge funds.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.13: Explain why regulators are concerned about the risks hedge funds pose to individual investors and institutions, and discuss evidence for the justification for those concerns and the need for increased regulation.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.14: Explain why regulators are concerned about liquidity and volatility risks that hedge funds might introduce into the economy, and discuss evidence for the justification for those concerns and the need for increased regulation.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.15: With respect to the future of hedge funds, explain why their aggregate performance may decline and why they may become more institutionalized and regulated.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.16: Discuss how trends in hedge funds and mutual funds will lead to mutual funds being more competitive with hedge funds.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.1: Compute the contractually promised gross return on a loan given the contractual rate and noninterest charges.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.2: Discuss the relationship between the promised return and the expected return on a loan.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.3: Compute the probability of default for a borrower given a linear probability model and the borrower’s relevant financial variables.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.4: Compute the probability of default (marginal default probability) for one-year corporate debt using Treasury- and corporate-bond yield curves.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.5: Compute the cumulative default probability over a multiyear period given the marginal default probability for each year and compute a marginal default probability using the term structure approach.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.6: Critique the mortality rate approach to deriving credit risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.7: Discuss how migration analysis is used to measure credit risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.8: Compute a concentration limit for a given borrower.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.9: Identify the inputs required to compute the expected return and variance of a loan or bond portfolio.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.10: Illustrate the concept of diversification within a modern portfolio theory framework.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.11: Explain how loan volume data can be used to measure loan concentration and how loan loss ratios can be used to measure concentration risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.1: Describe the difference between credit risk and sovereign risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.2: Describe debt repudiation and debt rescheduling.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.3: Describe the five key economic variables in measuring the probability of rescheduling.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.4: Describe the six major problems of using traditional country risk analysis models and techniques.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.5: Describe the different mechanisms for dealing with sovereign risk exposure.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.1: Distinguish between loans that are sold with and without recourse.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.2: Describe two major segments of the loan sales market.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.3: Contrast the characteristics of loans sold as participations and those sold as assignments.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.4: Identify the buyers and sellers of loans and briefly discuss their motives.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.5: Define securitization.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.6: Know and describe the role of each participant involved in the securitization process.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.7: Compare and contrast the mechanics of issuing securitized products using a trust versus a corporation as the special purpose entity.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.8: List the four guiding principles of FAS140 and the conditions necessary to be a qualified special purpose vehicle.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.9: Describe a typical Enron transaction that violated FAS140 and explain the anti-Enron rule, FIN46R.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.10: Discuss the various types of internal and external credit enhancements and interpret a simple numerical example.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.11: Explain liquidity risk in a securitized structure. Discuss the various types of internal and external credit enhancements for providing liquidity support.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.12: Define interest rate and currency risk for a securitized structure, and list securities used to hedge these exposures.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.13: Discuss the securitization process for mortgage-backed securities and asset-backed commercial paper.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.1: Define terms related to counterparty risk.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.2: Identify and explain the steps of using a Monte Carlo simulation engine to model potential future exposure to a counterparty, and discuss considerations for applying such a model to various market instruments.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.3: Identify and discuss the primary uses for potential future exposure models.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.4: Describe how a credit valuation adjustment is made to an over-the-counter derivatives portfolio.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.5: Define a risk-neutral mean loss rate.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.6: Describe the procedures for computing the market value of credit risk when one or both counterparties in the derivatives transaction has credit exposure.
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.7: Describe the differences between lending risk and counterparty credit risk.
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.8: Define current exposure, and discuss total current exposure for a counterparty including netting and margins
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.9: Describe the simple transaction and portfolio simulation methodologies, including advantages and disadvantages of each.
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.10: Explain the steps necessary to compute economic capital for counterparty risk using default only, full simulation
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.1: Describe external rating scales, the rating process, and the link between ratings and default.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.2: Discuss the impact of time horizon, economic cycle, industry, and geography on external ratings.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.3: Review the results and explanation of the impact of ratings changes on bond and stock prices.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.4: Explain and compare the through-the-cycle and at-the-point approaches to score a company.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.5: Explain how internal ratings models may create a procyclicality effect.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 4 (Loss Given Default)
|
LO 50.6: List the four factors that may lead to suboptimal loan recovery rates.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 4 (Loss Given Default)
|
LO 50.7: Know and discuss the factors affecting recovery rates of traded bonds.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 4 (Loss Given Default)
|
LO 50.8: Discuss the beta distribution, kernel modeling, and conditional recovery modeling as estimates of a recovery function.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.1: Calculate the value of a firm’s debt and equity and the volatility of firm value using the Merton model.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.2: Discuss the valuation of subordinate debt in the context of option pricing.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.3: Explain how interest rate dynamics and the interaction with firm value affect the price of debt.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.4: Identify difficulties in applying the Merton model to debt valuation, and discuss the results of empirical studies that use the Merton model to value debt.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.5: Calculate probability of default and loss given default.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.6: Explain the linkage between Merton and KMV’s equity models to EDF’s, as well as some problems in using these models to assess required capital.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.7: Define and differentiate (a) linear discriminant analysis, (b) parametric discrimination, (c) k-nearest neighbor, and (d) support vector machines as credit scoring models.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.8: Define and differentiate the following decision rules: (a) minimum error, (b) minimum risk, (c) Neyman-Pearson, and (d) minimax for classification purposes.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.9: Compare and contrast receiver operating characteristic and cumulative accuracy profile as user-independent performance measures.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.10: Discuss the problems and tradeoffs between classification and prediction models of performance.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.11: Define a vulnerable option, and explain how credit risk can be incorporated in determining the option’s value.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.1: Explain the four main reasons banks have developed credit portfolio tools.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.2: Discuss how the three risk drivers are modeled in the CreditMetrics model and list the four steps included in CreditMetrics.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.3: Describe Portfolio Manager and its similarity to CreditMetrics.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.4: List the improvements and novelties that apply to the Portfolio Risk Tracker.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.5: Explain how CreditPortfolioView models default risk.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.6: Explain CreditRisk+ and its weaknesses.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.7: Define expected loss, unexpected loss, value at risk, economic capital, and expected shortfall.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.8: Explain, including equations, the individual contribution to unexpected losses.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.1: Define a default swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.2: List the ISDA events that trigger a default swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.3: Calculate the cash settlement amount when a reference bond defaults.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.4: Explain the main types of default swaps.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.5: Define and explain the payments of a total rate of return swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.6: Define a credit spread option, including a description of the payoffs for both parties.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.7: Calculate the payoff for a credit spread option and whether the bond holder is over- or underhedged.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.8: Describe a credit spread forward and a credit spread swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.1: Describe a credit-linked note, including risks and benefits.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.2: Explain the structure of a typical cash collateralized debt obligation, including the use of a special purpose vehicle.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.3: Describe the difference between a cash and synthetic CDO.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.4: State the defining characteristics of (a) tranched portfolio default swaps, (b) tranched basket default swaps, and (c) collateralized debt obligation squared.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.5: Describe the initial structure, current success, and the relevant differences between BISTRO and J-Port.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.1: Explain which risks each credit derivative hedges.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.2: Calculate and explain the payoff resulting from a TROR hedge of operational risk.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.3: Calculate and explain the yield enhancement on a credit spread option and the underlying debt.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.4: Calculate and explain the benefits of a TROR hedge and credit spread option in cost reduction.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.5: Calculate and explain the profits using TROR, default swaps, and credit spread options to exploit arbitrage opportunities.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.6: List the risk weights under Basel II for sovereigns, banks, and corporations.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.7: Calculate and explain the benefits of using default swaps to reduce regulatory capital.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 6 (Risk Management with Credit Derivatives)
|
LO 55.8: Calculate the market VAR for a portfolio of options and the credit at risk for an investment-grade bond.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 6 (Risk Management with Credit Derivatives)
|
LO 55.9: Calculate and explain the CAR for a portfolio and a portfolio hedged with default swaps or total rate of return swaps.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.1: Define operational risk.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.2: Cite the BIS definition of operational risk, and summarize the controversy regarding this definition.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.3: Identify and discuss the five stages in the evolution of operational risk management.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.4: Identify the essential elements of an operational risk management framework.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.5: Discuss the advantages and disadvantages of mainstream approaches for measuring operational risk.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.6: Explain the basic indicator approach, standardized approach, and alternative standardized approach of estimating operational risk presented in Basel II.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.7: Describe each of the elements in an advanced measurement approach measuring system of operational risk.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.8: Explain the internal measurement approach, loss distribution approach, and scorecard approach included under the AMA.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.9: List the qualifying criteria to determine which capital estimation framework the bank is to use.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.10: Define key risk indicators and explain their use in estimating operational risk loss.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.11: Define the operational risk loss profile.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.12: Discuss what is unique in the application of the Monte Carlo method to estimating operational VAR.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.1: Compare and contrast top-down and bottom-up approaches to measuring operational risk.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.2: List and describe examples of top-down models for measuring operational risk.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.3: List and describe examples of bottom-up models for measuring operational risk.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.4: List and describe ways a firm can hedge against catastrophic operational losses.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.5: Describe the characteristics of catastrophe options and catastrophe bonds.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.6: Discuss limitations to operational risk hedging.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.1: Describe the TAN probability density function (pdf) and its application to OpRisk.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.2: Describe how TAN is adjusted for truncated loss data and demonstrate confidence intervals for the truncated TAN pdf.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.3: Compare and contrast the binomial, negative binomial, and Poisson distributions in analyzing the frequency of OpRisk losses.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.4: Describe the general procedure for estimating the economic capital for OpRisk exposure.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.5: Explain how the TAN pdf and a loss frequency distribution can be used to calculate OpRisk VAR with a Monte Carlo simulation (Model I).
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.6: Compare and contrast OpRisk economic capital Models I & II. IV. 4. AMA approach to Op. Risk
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.7: Explain the use of expected tail loss to determine OpRisk economic capital risk exposure (Model III).
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.8: Describe the four firm-wide OpRisk economic capital diversification methodologies.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.9: Describe the five major categories of loss data classification and explain the risk of poorly organized data.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.10: Discuss the advantages and disadvantages of mixing internal data with external data.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.1: Define model risk and identify and discuss sources of model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.2: Discuss the challenges involved with quantifying model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.3: Identify ways risk managers can protect against model risk, and discuss the role of senior managers in managing model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.4: Discuss procedures for vetting and reviewing a model and the function of an independent risk oversight unit.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.5: Discuss the implications of the assumptions of efficient markets for the source and management of model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.6: Discuss factors outside of the efficient market hypothesis assumption that may impact financial instrument prices.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.7: Discuss the implications of the assumption that financial instrument prices deviate from their fundamental values for the source and management of model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.8: Discuss the role of the model risk manager given the view that the methods of arriving at financial instrument prices may change in the future.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.1: Identify and discuss the factors that led to the financial crisis at Metallgesellschaft and identify why using a stack-and-roll hedging strategy was ineffective for Metallgesellschaft.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.2: Identify and discuss the factors that led to huge losses at Sumitomo, and describe measures that may have prevented those losses.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.3: Identify and discuss the factors that led to the collapse of Long-Term Capital Management.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.4: Identify and discuss the factors that led to the bankruptcy of Barings and risk management measures that may have prevented the bankruptcy.
|
|
Chincarini, Amaranth Debacle
|
LO 61.1: With respect to the collapse of Amaranth in September 2006, summarize the size and source of the losses.
|
|
Chincarini, Amaranth Debacle
|
LO 61.2: With respect to the collapse of Amaranth in September 2006, explain why it is important to determine whether standard risk measures at the time could have predicted the possible losses.
|
|
Chincarini, Amaranth Debacle
|
LO 61.3: List and describe three important properties of the natural gas futures market.
|
|
Chincarini, Amaranth Debacle
|
LO 61.4: With respect to natural gas, describe the futures and options available and their markets.
|
|
Chincarini, Amaranth Debacle
|
LO 61.5: Describe two historical patterns of natural gas futures returns for the month of September that would have led a trader to feel justified in taking large positions in that market on August 31, 2006.
|
|
Chincarini, Amaranth Debacle
|
LO 61.6: Describe how the patterns of returns for natural gas futures returns for the month of September 2006 were very different from the historical patterns.
|
|
Chincarini, Amaranth Debacle
|
LO 61.7: Compare the size of the losses on natural gas futures contracts in September 2006 to Amaranth’s losses and outline the questions this comparison raises.
|
|
Chincarini, Amaranth Debacle
|
LO 61.8: Describe the positions in energy derivatives that Amaranth Advisors would have to have held in order to incur its September 2006 losses.
|
|
Chincarini, Amaranth Debacle
|
LO 61.9: Explain whether Amaranth Advisors should have been aware of the potential market risk for the month of September 2006.
|
|
Chincarini, Amaranth Debacle
|
LO 61.10: Summarize the level of expected gains and VAR that Amaranth Advisors’ management may have had with respect to the positions they took and a probable reason why the losses exceeded the VAR. lesson that the Amaranth Advisors debacle provides with respect to making risk
|
|
Chincarini, Amaranth Debacle
|
LO 61.11: Describe empirical evidence that liquidity risk from higher than usual positions played a role in the losses incurred by Amaranth Advisors in September 2006.
|
|
Chincarini, Amaranth Debacle
|
LO 61.12: Summarize the lesson that the Amaranth Advisors debacle provides with respect to making risk
|
|
Chincarini, Amaranth Debacle
|
LO 61.13: Summarize Greenspan’s liquidity at risk measure as it would apply to hedge funds.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.1: Explain why it may be necessary to hedge corporate diversifiable risk and describe how this contrasts with the theory of perfect markets.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.2: Describe which risks a company should retain and which risks a company should layoff.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.3: Discuss the reasoning for decentralizing risk management at the firm, and explain the components and importance of decentralizing the risk-return tradeoff in a company.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.4: Explain the factors included in determining the right or optimal amount of corporate risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.5: Explain how firm variables can be used to estimate a firm-wide risk level and target a benchmark risk level. Specifically, use bond ratings and transition matrices to estimate firm risk and bond rating targets.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.6: Compare and contrast the management of default risk and the management of downgrade risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.7: Describe the relationship between VAR or volatility (of capital or earnings), required equity capital, and target probability of default, explain how risk management affects this relationship, and define the optimal level of risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.8: Describe the conceptual framework of ERM and explain each component.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.1: Identify the common traits associated with past major financial shocks.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.2: List and discuss ten fundamentals for anticipating financial shocks and limiting their severity.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.3: List and discuss recommendations and guiding principles concerning risk management and risk related disclosure practices.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.4: List and discuss recommendations and guiding principles concerning financial infrastructure.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.5: List and discuss recommendations and guiding principles concerning complex financial products.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.6: List and discuss recommendations and guiding principles concerning four emerging issues in financial markets
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.7: Discuss the four supervisory challenges identified by the CRMPG.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.1: List and describe the two overarching principles of the agreement among the President's Working Group on Financial Markets and U.S. Agency Principals on principles and guidelines regarding private pools of capital.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.2: Explain why PWG promotes limiting investors in private pools to only sophisticated investors.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.3: According to the PWG agreement, list the duties of investors in private pools.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.4: According to the PWG agreement, list the duties of fiduciaries that invest less sophisticated investors’ capital in private pools.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.5: According to the PWG agreement, list the duties of key creditors and counterparties.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.6: According to the PWG agreement, list and describe the duties of managers of private pools of capital.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.7: According to the PWG agreement, list and describe the duties of supervisors.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.1: Distinguish between economic and regulatory capital.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.2: Describe the relationship between economic capital and risk-adjusted return on capital.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.3: Compute the RAROC for a loan.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.4: Explain how capital is attributed to market, credit, and operational risk and calculate the capital charge for market risk and credit risk.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.5: Describe how economic capital is allocated for nonloan types of bank products.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.6: Explain why the RAROC approach may lead to incorrect economic capital allocation decisions and how the second-generation RAROC approach addresses this issue, and calculate a project’s adjusted RAROC to determine whether the project should be accepted.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.1: Define strategic capital allocation.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.2: Discuss the top-down and bottom-up approaches to capital allocation, including the difference between product and business risk.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.3: Define and compare the six methods of allocating economic capital.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.4: Explain how liquidity and information affect strategic capital allocation.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.5: Discuss the strengths and weaknesses of linking RAROC and EVA to develop a dynamic capital allocation model.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.1: Identify the primary justifications for the existence of banking regulation.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.2: Discuss the potential moral hazard issues associated with deposit insurance.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.3: Discuss the benefits and weaknesses of the original 1988 Basel Accord.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.4: Identify the primary goals of the Basel Committee in developing the Basel II Accord.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.5: Describe how the necessary components for calculating capital requirements are determined under the standardized and internal ratings-based approaches.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.6: Discuss how Basel II accounts for credit risk mitigation and the treatment of securitization.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.7: Discuss the five common criticisms of the Basel II framework.
|
|
Basel readings
|
LO 68.1: Discuss the scope of the Basel II Accord and how it applies to various bank subsidiaries or business relationships.
|
|
Basel readings
|
LO 68.2: Define the types of capital, and discuss how each type is used to meet capital requirements under Basel II.
|
|
Basel readings
|
LO 68.3: Describe the Basel II Accord’s requirements for calculating risk-weights using both the standardized and the internal ratings-based approaches when accounting for credit risk.
|
|
Basel readings
|
LO 68.4: Discuss the concepts of expected loss, unexpected loss calibration, and downturn loss given default that are part of the IRB approach.
|
|
Basel readings
|
LO 68.5: List the necessary conditions for the IRB credit risk weight function.
|
|
Basel readings
|
LO 68.6: Explain the IRB credit risk weight function, the variables, and their interrelationships.
|
|
Basel readings
|
LO 68.7: Define name and sector concentration and the related violation of the conditions for the IRB risk weight function.
|
|
Basel readings
|
LO 68.8: Explain the granularity adjustment in Gordy and Lütkebohmert, discussing recent innovation and continued concerns.
|
|
Basel readings
|
LO 68.9: Explain the gap between real economic capital and ASRF performance.
|
|
Basel readings
|
LO 68.10: Compare and contrast Pykhtin, binomial expansion technique, Duellmann, Duellmann and Masschelein, and Garcia Cespedes et al. models to estimate capital.
|
|
Basel readings
|
LO 68.11: Explain how credit risk mitigation techniques are addressed in the Basel II Accord.
|
|
Basel readings
|
LO 68.12: Discuss the Basel II Accord’s standardized and IRB treatments of asset securitization.
|
|
Basel readings
|
LO 68.13: Discuss the supervisory backtesting framework used in conjunction with an institution’s internal models, and describe the 3-zone supervisory framework for evaluating backtesting results.
|
|
Basel readings
|
LO 68.14: Discuss the three methods for addressing operational risk under the Basel II Accord.
|
|
Basel readings
|
LO 68.15: Discuss the “evolutionary aspect” of the risk measurement procedures addressed in the Basel II Accord.
|
|
Basel readings
|
LO 68.16: Describe the four principles of the Basel II Accord’s Second Pillar and describe specific issues that should be addressed as part of the supervisory review process.
|
|
Basel readings
|
LO 68.17: Discuss the purpose of the Third Pillar, and describe the procedures for addressing the concept of market discipline.
|
|
Basel readings
|
LO 68.18: Explain the negative bank behaviors that may result with the implementation of Basel II.
|
|
Basel readings
|
LO 68.19: Explain potential problems with the risk analytics of Basel II.
|
|
Basel readings
|
LO 68.20: Explain issues regarding the implementation of Pillar 2 (Supervision) and Pillar 3 (Market Discipline) of Basel II.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.1: Explain the silo approach to capital regulation for financial conglomerates, and discuss its limitations.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.2: Summarize the recent regulatory debate regarding risk and capital frameworks for financial conglomerates.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.3: Describe the special challenges a conglomerate creates for capital management.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.4: Discuss how economic capital can serve as a common standard for assessing risk in a conglomerate.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.5: Describe the building-block approach for aggregating risks at a financial conglomerate.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.6: Discuss the diversification benefits achieved at each of the three levels of aggregation for a financial conglomerate.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.7: Discuss current industry practices for risk modeling and capital management, and describe the “hub and spoke” organizational model for conglomerates.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.8: Discuss the “3+1 pillars” approach for capital regulation of financial conglomerates in accordance with the New Basel Accord.
|
FRM 2007 LOs_sortByReading
|
|
|
|
Reading
|
Learning Outcome
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.1: Explain the silo approach to capital regulation for financial conglomerates, and discuss its limitations.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.2: Summarize the recent regulatory debate regarding risk and capital frameworks for financial conglomerates.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.3: Describe the special challenges a conglomerate creates for capital management.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.4: Discuss how economic capital can serve as a common standard for assessing risk in a conglomerate.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.5: Describe the building-block approach for aggregating risks at a financial conglomerate.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.6: Discuss the diversification benefits achieved at each of the three levels of aggregation for a financial conglomerate.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.7: Discuss current industry practices for risk modeling and capital management, and describe the “hub and spoke” organizational model for conglomerates.
|
|
A. Kuritzkes, Financial Conglomerates
|
LO 69.8: Discuss the “3+1 pillars” approach for capital regulation of financial conglomerates in accordance with the New Basel Accord.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.1: Define market risk.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.2: Describe five reasons why market risk measurement is important.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.3: List the models being used to calculate market risk exposure.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 10
|
LO 18.4: List the methods the Bank for International Settlement uses to regulate market risks.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.1: Describe the different sources of foreign exchange risk exposure.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.2: Explain the different types of foreign trading activities and the sources of most profits and losses on foreign exchange trading.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.3: Describe foreign exchange exposure resulting from mismatches between foreign financial asset and liability portfolios, and explain how returns and risks of foreign investing can impact returns.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.4: Explain on-balance-sheet hedging.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.5: Explain off-balance-sheet hedging with forwards.
|
|
A. Saunders, Financial Institutions Mgmt (5th Ed), Chapter 15
|
LO 19.6: Explain why diversification in multicurrency foreign asset-liability positions could reduce portfolio risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.1: Explain why it may be necessary to hedge corporate diversifiable risk and describe how this contrasts with the theory of perfect markets.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.2: Describe which risks a company should retain and which risks a company should layoff.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.3: Discuss the reasoning for decentralizing risk management at the firm, and explain the components and importance of decentralizing the risk-return tradeoff in a company.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.4: Explain the factors included in determining the right or optimal amount of corporate risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.5: Explain how firm variables can be used to estimate a firm-wide risk level and target a benchmark risk level. Specifically, use bond ratings and transition matrices to estimate firm risk and bond rating targets.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.6: Compare and contrast the management of default risk and the management of downgrade risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.7: Describe the relationship between VAR or volatility (of capital or earnings), required equity capital, and target probability of default, explain how risk management affects this relationship, and define the optimal level of risk.
|
|
B. Nocco, Enterprise Risk Management: Theory & Practice
|
LO 62.8: Describe the conceptual framework of ERM and explain each component.
|
|
Basel readings
|
LO 68.1: Discuss the scope of the Basel II Accord and how it applies to various bank subsidiaries or business relationships.
|
|
Basel readings
|
LO 68.2: Define the types of capital, and discuss how each type is used to meet capital requirements under Basel II.
|
|
Basel readings
|
LO 68.3: Describe the Basel II Accord’s requirements for calculating risk-weights using both the standardized and the internal ratings-based approaches when accounting for credit risk.
|
|
Basel readings
|
LO 68.4: Discuss the concepts of expected loss, unexpected loss calibration, and downturn loss given default that are part of the IRB approach.
|
|
Basel readings
|
LO 68.5: List the necessary conditions for the IRB credit risk weight function.
|
|
Basel readings
|
LO 68.6: Explain the IRB credit risk weight function, the variables, and their interrelationships.
|
|
Basel readings
|
LO 68.7: Define name and sector concentration and the related violation of the conditions for the IRB risk weight function.
|
|
Basel readings
|
LO 68.8: Explain the granularity adjustment in Gordy and Lütkebohmert, discussing recent innovation and continued concerns.
|
|
Basel readings
|
LO 68.9: Explain the gap between real economic capital and ASRF performance.
|
|
Basel readings
|
LO 68.10: Compare and contrast Pykhtin, binomial expansion technique, Duellmann, Duellmann and Masschelein, and Garcia Cespedes et al. models to estimate capital.
|
|
Basel readings
|
LO 68.11: Explain how credit risk mitigation techniques are addressed in the Basel II Accord.
|
|
Basel readings
|
LO 68.12: Discuss the Basel II Accord’s standardized and IRB treatments of asset securitization.
|
|
Basel readings
|
LO 68.13: Discuss the supervisory backtesting framework used in conjunction with an institution’s internal models, and describe the 3-zone supervisory framework for evaluating backtesting results.
|
|
Basel readings
|
LO 68.14: Discuss the three methods for addressing operational risk under the Basel II Accord.
|
|
Basel readings
|
LO 68.15: Discuss the “evolutionary aspect” of the risk measurement procedures addressed in the Basel II Accord.
|
|
Basel readings
|
LO 68.16: Describe the four principles of the Basel II Accord’s Second Pillar and describe specific issues that should be addressed as part of the supervisory review process.
|
|
Basel readings
|
LO 68.17: Discuss the purpose of the Third Pillar, and describe the procedures for addressing the concept of market discipline.
|
|
Basel readings
|
LO 68.18: Explain the negative bank behaviors that may result with the implementation of Basel II.
|
|
Basel readings
|
LO 68.19: Explain potential problems with the risk analytics of Basel II.
|
|
Basel readings
|
LO 68.20: Explain issues regarding the implementation of Pillar 2 (Supervision) and Pillar 3 (Market Discipline) of Basel II.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.5: Define securitization.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.6: Know and describe the role of each participant involved in the securitization process.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.7: Compare and contrast the mechanics of issuing securitized products using a trust versus a corporation as the special purpose entity.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.8: List the four guiding principles of FAS140 and the conditions necessary to be a qualified special purpose vehicle.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.9: Describe a typical Enron transaction that violated FAS140 and explain the anti-Enron rule, FIN46R.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.10: Discuss the various types of internal and external credit enhancements and interpret a simple numerical example.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.11: Explain liquidity risk in a securitized structure. Discuss the various types of internal and external credit enhancements for providing liquidity support.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.12: Define interest rate and currency risk for a securitized structure, and list securities used to hedge these exposures.
|
|
C. Culp, Structured Finance, Chapter 16 (Securitization)
|
LO 48.13: Discuss the securitization process for mortgage-backed securities and asset-backed commercial paper.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.1: Explain the interrelationship between funding liquidity risk and market liquidity risk.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.2: Describe alternative methods for measuring liquidity risk.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.3: Discuss factors that impact an asset’s liquidation cost.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.4: Discuss problems with using the bid-ask spread as a measure of liquidity.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.5: Calculate liquidity-adjusted VAR.
|
|
C. Culp, The Risk Management Process, Chapter 17 (Liquidity Risk)
|
LO 20.6: Discuss ways firms can minimize their exposure to liquidity risk.
|
|
Chincarini, Amaranth Debacle
|
LO 61.1: With respect to the collapse of Amaranth in September 2006, summarize the size and source of the losses.
|
|
Chincarini, Amaranth Debacle
|
LO 61.2: With respect to the collapse of Amaranth in September 2006, explain why it is important to determine whether standard risk measures at the time could have predicted the possible losses.
|
|
Chincarini, Amaranth Debacle
|
LO 61.3: List and describe three important properties of the natural gas futures market.
|
|
Chincarini, Amaranth Debacle
|
LO 61.4: With respect to natural gas, describe the futures and options available and their markets.
|
|
Chincarini, Amaranth Debacle
|
LO 61.5: Describe two historical patterns of natural gas futures returns for the month of September that would have led a trader to feel justified in taking large positions in that market on August 31, 2006.
|
|
Chincarini, Amaranth Debacle
|
LO 61.6: Describe how the patterns of returns for natural gas futures returns for the month of September 2006 were very different from the historical patterns.
|
|
Chincarini, Amaranth Debacle
|
LO 61.7: Compare the size of the losses on natural gas futures contracts in September 2006 to Amaranth’s losses and outline the questions this comparison raises.
|
|
Chincarini, Amaranth Debacle
|
LO 61.8: Describe the positions in energy derivatives that Amaranth Advisors would have to have held in order to incur its September 2006 losses.
|
|
Chincarini, Amaranth Debacle
|
LO 61.9: Explain whether Amaranth Advisors should have been aware of the potential market risk for the month of September 2006.
|
|
Chincarini, Amaranth Debacle
|
LO 61.10: Summarize the level of expected gains and VAR that Amaranth Advisors’ management may have had with respect to the positions they took and a probable reason why the losses exceeded the VAR. lesson that the Amaranth Advisors debacle provides with respect to making risk
|
|
Chincarini, Amaranth Debacle
|
LO 61.11: Describe empirical evidence that liquidity risk from higher than usual positions played a role in the losses incurred by Amaranth Advisors in September 2006.
|
|
Chincarini, Amaranth Debacle
|
LO 61.12: Summarize the lesson that the Amaranth Advisors debacle provides with respect to making risk
|
|
Chincarini, Amaranth Debacle
|
LO 61.13: Summarize Greenspan’s liquidity at risk measure as it would apply to hedge funds.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.1: Identify the common traits associated with past major financial shocks.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.2: List and discuss ten fundamentals for anticipating financial shocks and limiting their severity.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.3: List and discuss recommendations and guiding principles concerning risk management and risk related disclosure practices.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.4: List and discuss recommendations and guiding principles concerning financial infrastructure.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.5: List and discuss recommendations and guiding principles concerning complex financial products.
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.6: List and discuss recommendations and guiding principles concerning four emerging issues in financial markets
|
|
CRMPG II, Report on Counterparty Risk
|
LO 63.7: Discuss the four supervisory challenges identified by the CRMPG.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.1: Distinguish between economic and regulatory capital.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.2: Describe the relationship between economic capital and risk-adjusted return on capital.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.3: Compute the RAROC for a loan.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.4: Explain how capital is attributed to market, credit, and operational risk and calculate the capital charge for market risk and credit risk.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.5: Describe how economic capital is allocated for nonloan types of bank products.
|
|
Crouhy, Risk Management, Chapter 14 (Capital Allocation & Performance Measurement)
|
LO 65.6: Explain why the RAROC approach may lead to incorrect economic capital allocation decisions and how the second-generation RAROC approach addresses this issue, and calculate a project’s adjusted RAROC to determine whether the project should be accepted.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.1: Identify the primary justifications for the existence of banking regulation.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.2: Discuss the potential moral hazard issues associated with deposit insurance.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.3: Discuss the benefits and weaknesses of the original 1988 Basel Accord.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.4: Identify the primary goals of the Basel Committee in developing the Basel II Accord.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.5: Describe how the necessary components for calculating capital requirements are determined under the standardized and internal ratings-based approaches.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.6: Discuss how Basel II accounts for credit risk mitigation and the treatment of securitization.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 10 (Regulation)
|
LO 67.7: Discuss the five common criticisms of the Basel II framework.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.1: Describe external rating scales, the rating process, and the link between ratings and default.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.2: Discuss the impact of time horizon, economic cycle, industry, and geography on external ratings.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.3: Review the results and explanation of the impact of ratings changes on bond and stock prices.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.4: Explain and compare the through-the-cycle and at-the-point approaches to score a company.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 2 (External & Internal Ratings)
|
LO 50.5: Explain how internal ratings models may create a procyclicality effect.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.6: Explain the linkage between Merton and KMV’s equity models to EDF’s, as well as some problems in using these models to assess required capital.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.7: Define and differentiate (a) linear discriminant analysis, (b) parametric discrimination, (c) k-nearest neighbor, and (d) support vector machines as credit scoring models.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.8: Define and differentiate the following decision rules: (a) minimum error, (b) minimum risk, (c) Neyman-Pearson, and (d) minimax for classification purposes.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.9: Compare and contrast receiver operating characteristic and cumulative accuracy profile as user-independent performance measures.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 3 (Default Risk: Quantitative Methodologies)
|
LO 51.10: Discuss the problems and tradeoffs between classification and prediction models of performance.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 4 (Loss Given Default)
|
LO 50.6: List the four factors that may lead to suboptimal loan recovery rates.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 4 (Loss Given Default)
|
LO 50.7: Know and discuss the factors affecting recovery rates of traded bonds.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 4 (Loss Given Default)
|
LO 50.8: Discuss the beta distribution, kernel modeling, and conditional recovery modeling as estimates of a recovery function.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.1: Explain the four main reasons banks have developed credit portfolio tools.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.2: Discuss how the three risk drivers are modeled in the CreditMetrics model and list the four steps included in CreditMetrics.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.3: Describe Portfolio Manager and its similarity to CreditMetrics.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.4: List the improvements and novelties that apply to the Portfolio Risk Tracker.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.5: Explain how CreditPortfolioView models default risk.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.6: Explain CreditRisk+ and its weaknesses.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.7: Define expected loss, unexpected loss, value at risk, economic capital, and expected shortfall.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 6 (Credit Risk Portfolio Models)
|
LO 52.8: Explain, including equations, the individual contribution to unexpected losses.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.1: Define strategic capital allocation. LO 66.2: Discuss the top-down and bottom-up approaches to capital allocation, including the difference between product and business risk. LO 66.3: Define and compare the six methods of allocating economic capital. LO 66.4: Explain how liquidity and information affect strategic capital allocation. LO 66.5: Discuss the strengths and weaknesses of linking RAROC and EVA to develop a dynamic capital allocation model. LO 67.1: Identify the primary justifications for the existence of banking regulation. LO 67.2: Discuss the potential moral hazard issues associated with deposit insurance. LO 67.3: Discuss the benefits and weaknesses of the original 1988 Basel Accord. LO 67.4: Identify the primary goals of the Basel Committee in developing the Basel II Accord. LO 67.5: Describe how the necessary components for calculating capital requirements are determined under the standardized and internal ratings-based approaches. LO 67.6: Discuss how Basel II accounts for credit risk mitigation and the treatment of securitization. LO 67.7: Discuss the five common criticisms of the Basel II framework. LO 68.1: Discuss the scope of the Basel II Accord and how it applies to various bank subsidiaries or business relationships. LO 68.2: Define the types of capital, and discuss how each type is used to meet capital requirements under Basel II.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.2: Discuss the top-down and bottom-up approaches to capital allocation, including the difference between product and business risk.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.3: Define and compare the six methods of allocating economic capital.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.4: Explain how liquidity and information affect strategic capital allocation.
|
|
De Servigny, Measuring & Managing Credit Risk, Chapter 7 (Credit Risk Management & Strategic Capital Allocation)
|
LO 66.5: Discuss the strengths and weaknesses of linking RAROC and EVA to develop a dynamic capital allocation model.
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.7: Describe the differences between lending risk and counterparty credit risk.
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.8: Define current exposure, and discuss total current exposure for a counterparty including netting and margins
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.9: Describe the simple transaction and portfolio simulation methodologies, including advantages and disadvantages of each.
|
|
Dev, Economic Capital, Chapter 7 (Counterparty risk)
|
LO 49.10: Explain the steps necessary to compute economic capital for counterparty risk using default only, full simulation
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.1: Define terms related to counterparty risk.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.2: Identify and explain the steps of using a Monte Carlo simulation engine to model potential future exposure to a counterparty, and discuss considerations for applying such a model to various market instruments.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.3: Identify and discuss the primary uses for potential future exposure models.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.4: Describe how a credit valuation adjustment is made to an over-the-counter derivatives portfolio.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.5: Define a risk-neutral mean loss rate.
|
|
E. Canabarro, Measuring & Marking Counterparty Risk
|
LO 49.6: Describe the procedures for computing the market value of credit risk when one or both counterparties in the derivatives transaction has credit exposure.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.1: Describe the TAN probability density function (pdf) and its application to OpRisk.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.2: Describe how TAN is adjusted for truncated loss data and demonstrate confidence intervals for the truncated TAN pdf.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.3: Compare and contrast the binomial, negative binomial, and Poisson distributions in analyzing the frequency of OpRisk losses.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.4: Describe the general procedure for estimating the economic capital for OpRisk exposure.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.5: Explain how the TAN pdf and a loss frequency distribution can be used to calculate OpRisk VAR with a Monte Carlo simulation (Model I).
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.6: Compare and contrast OpRisk economic capital Models I & II. IV. 4. AMA approach to Op. Risk
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.7: Explain the use of expected tail loss to determine OpRisk economic capital risk exposure (Model III).
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.8: Describe the four firm-wide OpRisk economic capital diversification methodologies.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.9: Describe the five major categories of loss data classification and explain the risk of poorly organized data.
|
|
E. Davis, The Advanced Measurement Approach to Operational Risk, Chapter 3
|
LO 58.10: Discuss the advantages and disadvantages of mixing internal data with external data.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.5: Discuss how a trend-following strategy and a convergence strategy can be represented through a combination of options.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.6: Identify the five primary HFR fixed-income index categories, and discuss characteristics of each.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.7: Discuss actual and hypothetical performance of fixed-income hedge funds during market extremes.
|
|
Hsieh & Fung, Risk in Fixed Income Hedge Fund Strategies
|
LO 43.8: Discuss implications of identifying fixed-income hedge fund asset-based style factors for investors, counterparties, and regulators.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.1: Illustrate and explain why an investor would write a covered call or a protective put strategy.
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.2: Illustrate and explain why an investor would enter into a spread strategy (e.g., bull spread, bear spread, calendar spread, or butterfly spread).
|
|
Hull, Chapter 10, Trading Strategies Involving Options
|
LO 36.3: Illustrate and explain why an investor would enter into a combination strategy (e.g., straddles, strangles, strips, or straps).
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.1: Calculate the value of a European call or put option using a one-step and a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.2: Calculate the value of an American call or put option using a two-step binomial model.
|
|
Hull, Chapter 11, Binomial Trees
|
LO 34.3: Discuss how the binomial model value converges as time periods are added.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.4: Identify the assumptions underlying the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.5: Compute the value of a European option using the Black-Scholes-Merton model.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.6: Discuss how cash flows affect the pricing of an option.
|
|
Hull, Chapter 13, Black-Scholes Model
|
LO 34.7: Identify the methods for estimating future volatility.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.1: Discuss the risks of naked and covered positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.2: Describe how naked and covered positions can be used to generate a stop-loss trading strategy.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.3: Describe the characteristics of delta hedging for option, forward, and futures contracts, and discuss the dynamic aspects of delta hedging.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.4: Define the delta of a portfolio.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.5: Define and discuss “theta” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.6: Define and discuss “gamma” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.7: Describe how to create and maintain a gamma-neutral position.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.8: Discuss the relationship between delta, theta, and gamma.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.9: Define and discuss “vega” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.10: Define and discuss “rho” for option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.11: Describe how hedging activities take place in practice, and discuss how scenario analysis can be used to formulate expected gains and losses with option positions.
|
|
Hull, Chapter 15, Greek Letters
|
LO 37.12: Define and discuss how portfolio insurance can be created through option instruments and stock index futures.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.1: Explain how put-call parity indicates that the same implied volatility used to price calls is the one used to price puts.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.2: Explain why a volatility smile may exist in foreign currency options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.3: Explain why a volatility smile may exist in equity options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.4: Describe how the volatility term structure and volatility surfaces may be used when pricing options.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.5: Describe how the volatility smile affects calculation of option Greeks.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.6: Discuss how the implied volatility of an option might be affected by jumps in asset prices.
|
|
Hull, Chapter 16, Volatility Smiles
|
LO 35.7: Discuss the general empirical testing results of the Black-Scholes-Merton option pricing model.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.5: Distinguish between a long futures position and a short futures position.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.6: Describe the characteristics of a futures contract and explain how futures positions are settled.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.7: Describe the marking-to-market procedure, the initial margin, and the maintenance margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.8: Compute the variation margin.
|
|
Hull, Chapter 2, Mechanics of future markets
|
LO 27.9: Explain the role of the clearinghouse.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.1: Define exotic derivatives, and briefly describe the four primary issues to be considered when evaluating alternative approaches to taking a position in exotic derivatives.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.2: Define and illustrate the use of packages in formulating a zero-cost product.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.3: List and describe how various option characteristics can transform standard American options into nonstandard American options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.4: Describe the characteristics of forward start options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.5: Describe how compound options are created.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.6: Discuss the characteristics of a chooser option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.7: Describe the characteristics of barrier options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.8: Describe how binary options generate discontinuous payoff profiles.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.9: Discuss the various factors affecting lookback options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.10: Describe the characteristics of a shout option.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.11: Describe an Asian option, and discuss the factors impacting Asian options.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.12: Describe the workings of options used to exchange one asset for another.
|
|
Hull, Chapter 22, Exotic Options
|
LO 38.13: Define basket options.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.1: Differentiate between a short hedge and a long hedge, and identify situations where each is appropriate.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.2: Define and calculate the basis.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.3: Define the types of basis risk and explain how they arise in futures hedging.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.4: Define, calculate, and interpret the minimum variance hedge ratio.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.5: Calculate the number of stock index futures contracts to buy or sell to hedge an equity portfolio or individual stock.
|
|
Hull, Chapter 3, Hedging Strategies Using Futures
|
LO 28.6: Identify situations when a rolling hedge is appropriate, and discuss the risks of such a strategy.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.1: State and explain the cost-of-carry model for forward prices using both assets that have interim cash flows and assets that do not have interim cash flows.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.2: Compute the forward price given both the price of the underlying and the appropriate carrying costs of the underlying.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.3: Calculate the value of a forward contract.
|
|
Hull, Chapter 5, Determination of Forward & Futures Prices
|
LO 27.4: Describe the differences between forward and futures contracts.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 22.1: Generate the discount function given a series of coupon bond prices.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.1: Identify and apply the three most common day count conventions.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.2: Explain the U.S. Treasury bond (T-bond) futures contract conversion factor.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.3: Calculate the Eurodollar futures contract convexity adjustment.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.4: Formulate a duration-based hedging strategy using interest rate futures.
|
|
Hull, Chapter 6, Interest Rate Markets
|
LO 29.5: Identify the limitations of using a duration-based hedging strategy.
|
|
Hull, Chapter 7, Swaps
|
LO 31.1: Illustrate the mechanics and compute the cash flows of a plain vanilla interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.2: Explain how an interest rate swap can be combined with an existing asset or liability to transform the interest rate risk.
|
|
Hull, Chapter 7, Swaps
|
LO 31.3: Explain the advantages and disadvantages of the comparative advantage argument often used for the existence of the swap market.
|
|
Hull, Chapter 7, Swaps
|
LO 31.4: Explain how the discount rates in a swap are computed.
|
|
Hull, Chapter 7, Swaps
|
LO 31.5: Explain how a swap can be interpreted as two simultaneous bond positions or as a sequence of forward rate agreements (FRAs).
|
|
Hull, Chapter 7, Swaps
|
LO 31.6: Calculate the value of an interest rate swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.7: Explain the mechanics and calculate the value of a currency swap.
|
|
Hull, Chapter 7, Swaps
|
LO 31.8: Explain the role of credit risk inherent in an existing swap position.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.1: Explain the specifications of exchange-traded stock options including strike, expiration dates, terminology, dividend and stock split adjustments, and position limits.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.2: Describe a flex option and long-term equity anticipation securities (LEAPS®).
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.3: Explain why margin is required for the writer of options but not for owners of options.
|
|
Hull, Chapter 8, Mechanics of Options Markets
|
LO 32.4: Explain the differences between exchange-traded options and warrants, executive stock options, and convertible bonds.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.1: Identify the six factors that affect an option’s price.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.2: Explain how the six factors affect an option’s price for both European and American options.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.3: Identify upper and lower bounds for option pricing.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.4: Explain put-call parity and use it to compute option values.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.5: Explain the difference between a European and American call on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.6: Contrast and explain the early exercise features of American call and put options on a nondividend-paying stock.
|
|
Hull, Chapter 9, Properties of Stock Options
|
LO 33.7: Explain the relationship between the prices of American call and put options on a nondividend-paying stock within the context of a put-call parity relationship.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.1: Define model risk and identify and discuss sources of model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.2: Discuss the challenges involved with quantifying model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.3: Identify ways risk managers can protect against model risk, and discuss the role of senior managers in managing model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.4: Discuss procedures for vetting and reviewing a model and the function of an independent risk oversight unit.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.5: Discuss the implications of the assumptions of efficient markets for the source and management of model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.6: Discuss factors outside of the efficient market hypothesis assumption that may impact financial instrument prices.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.7: Discuss the implications of the assumption that financial instrument prices deviate from their fundamental values for the source and management of model risk.
|
|
K. Dowd, Measuring Market Risk (2nd Ed), Chapter 16 (Model Risk)
|
LO 59.8: Discuss the role of the model risk manager given the view that the methods of arriving at financial instrument prices may change in the future.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.1: Define operational risk.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.2: Cite the BIS definition of operational risk, and summarize the controversy regarding this definition.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.3: Identify and discuss the five stages in the evolution of operational risk management.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.4: Identify the essential elements of an operational risk management framework.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.5: Discuss the advantages and disadvantages of mainstream approaches for measuring operational risk.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.6: Explain the basic indicator approach, standardized approach, and alternative standardized approach of estimating operational risk presented in Basel II.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.7: Describe each of the elements in an advanced measurement approach measuring system of operational risk.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.8: Explain the internal measurement approach, loss distribution approach, and scorecard approach included under the AMA.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.9: List the qualifying criteria to determine which capital estimation framework the bank is to use.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.10: Define key risk indicators and explain their use in estimating operational risk loss.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.11: Define the operational risk loss profile.
|
|
Kalyvas, Integrated Market, Credit & Operational Risk, Chapter 3 (Operational Risk)
|
LO 56.12: Discuss what is unique in the application of the Monte Carlo method to estimating operational VAR.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.1: Compare and contrast top-down and bottom-up approaches to measuring operational risk.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.2: List and describe examples of top-down models for measuring operational risk.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.3: List and describe examples of bottom-up models for measuring operational risk.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.4: List and describe ways a firm can hedge against catastrophic operational losses.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.5: Describe the characteristics of catastrophe options and catastrophe bonds.
|
|
L. Allen, Extending VaR to Operational Risk, Chapter 5
|
LO 57.6: Discuss limitations to operational risk hedging.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.1: Discuss reasons for the widespread adoption of VAR as a measure of risk.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.2: Define value at risk and calculate VAR for a single asset on both a dollar and percentage basis.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.3: Convert a daily VAR measure into a weekly, monthly, or annual VAR measure.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.4: Discuss assumptions underlying VAR calculations.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.5: Explain why it is best to use continuously compounded rates of return when calculating VAR.
|
|
L. Allen, Intro to VaR, Chapter 1
|
LO 7.6: Calculate portfolio VAR and describe the primary factors that affect portfolio risk.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.7: Differentiate between linear and non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.8: Describe the calculation of VAR for a linear derivative.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.9: Explain how the addition of second-order terms through the Taylor approximation improves the estimate of VAR for non-linear derivatives.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.10: Discuss why the Taylor approximation is ineffective for certain types of securities.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.11: Explain the differences between the delta-normal and full-revaluation methods for measuring the risk
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.12: Describe the structured Monte Carlo approach to measuring VAR, and identify the advantages and disadvantages of the SMC approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.13: Discuss the implications of correlation breakdown for scenario analysis.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.14: Describe the primary approaches to stress testing and the advantages and disadvantages of each approach.
|
|
L. Allen, Putting VaR to Work, Chapter 3
|
LO 7.15: Describe the worst case scenario measure as an extension to VAR.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.1: Identify the ways that distributions of asset returns tend to deviate from a normal distribution.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.2: Discuss potential reasons for the existence of “fat tails” in a return distribution and the implications of “fat tails” for analyzing distributions of asset returns.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.3: Discuss the implications of regime switching for quantifying volatility.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.4: Explain the various approaches for estimating VAR.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.5: Compare and contrast parametric approaches for estimating conditional volatility, including the historical standard deviation approach, the RiskMetrics® approach, and the GARCH approach.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.6: Discuss the advantages and disadvantages of nonparametric methods for forecasting volatility, including the historic simulation, multivariate density estimation, and hybrid methods.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.7: Explain return aggregation in the context of volatility forecasting methods.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.8: Explain how implied volatility can be used as a predictor of future volatility, and discuss the advantages and disadvantages of using implied volatility to predict future volatility.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.9: Discuss the implications of mean reversion in returns and return volatility for forecasting VAR over long time horizons.
|
|
L. Allen, Quantifying Volatility in VaR Models, Chapter 2
|
LO 11.10: Discuss the implications of using nonsynchronous data for estimating correlations, and describe ways to mitigate the impact of nonsynchronous data when estimating risk.
|
|
L. Kalyvas, Extreme Value Theory
|
LO 16.1: Describe the problem with VAR estimation for which extreme value theory provides a potential solution.
|
|
L. Kalyvas, Extreme Value Theory
|
LO 16.2: Discuss the advantages and disadvantages of the block maxima and peaks-over-threshold approximations for extreme value theory.
|
|
L. Kalyvas, Extreme Value Theory
|
LO 16.3: Discuss the importance of tail size and time dependency in the application of extreme value theory.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 27 (Style Drifts)
|
LO 44.7: Discuss the differences in how investment style is assessed between hedge funds and traditional long-only investments.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 27 (Style Drifts)
|
LO 44.8: Define the concept of style drift as it pertains to hedge funds and the importance of style drift monitoring for hedge fund investors.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 27 (Style Drifts)
|
LO 44.9: Discuss the reasons why hedge fund managers may drift from their styles and approaches for monitoring and detecting style drift.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 42.15: Discuss the general structure and objective of a fund of hedge funds, explain how it can be classified according to diversification characteristics, and discuss considerations for strategy allocation in a fund of hedge funds.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.1: Identify and discuss the types of risk faced by a fund of hedge funds.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.2: List primary risk factors for various examples of hedge fund strategies.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.3: Discuss the role of leverage in defining the risk profile of a hedge fund.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.4: Discuss the issue of hedge fund transparency as it pertains to the risk and return goals of an investor.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.5: Identify two components of proactive risk management, and discuss how each component addresses a fund of hedge fund’s generic risk.
|
|
Lars Jaeger, New Generation of Risk Management for Hedge Funds, Chapter 6 (Funds of Hedge Funds)
|
LO 44.6: Discuss how ongoing risk monitoring and management should be applied at the investment and portfolio levels of a fund of hedge funds.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.1: Describe an equity long/short strategy and discuss its major determinants of return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.2: Describe an equity market-neutral strategy, define pair trading, and identify examples of market inefficiencies exploited by market-neutral hedge fund managers.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.3: Describe an equity market timing strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.4: Describe a short-selling strategy and discuss issues specific to short-selling managers.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.5: Describe a convertible arbitrage strategy and identify and describe three potential sources of return from a convertible arbitrage strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.6: Describe the various forms of a fixed-income arbitrage strategy and its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.7: Describe a volatility arbitrage strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.8: Describe a capital structure arbitrage strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.9: Identify types of event-driven strategies.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.10: Describe a merger arbitrage strategy and its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.11: Describe a distressed securities strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.12: Describe a Regulation D strategy and identify its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.13: Describe a global macro strategy and identify its primary sources of risk and return.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 5 (Individual Hedge Funds)
|
LO 42.14: Differentiate between a systematic and discretionary managed futures strategy and describe trend following as a systematic managed-futures strategy.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.1: Discuss the challenges of benchmarking alpha returns.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.2: Explain the problems with existing hedge fund indices.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.3: Identify the attributes of a good hedge fund index.
|
|
Lars Jaeger, Through the Alpha Screen, Chapter 9 (Benchmarking Hedge Fund Performance)
|
LO 43.4: Discuss considerations for creating a more useful hedge fund index.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.1: Define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.2: Discuss the two defining properties of probability.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.3: Compare and contrast unconditional and conditional probabilities.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.4: Define joint probability and interpret the joint probability of any number of independent events.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.8: Use Bayes’ formula to determine the probability of causes for a given event.
|
|
M. Spiegel, Probability, Chapter 1 (Basic Prob)
|
LO 1.9: Determine the number of possible permutations of n objects taken r at a time and the number of possible combinations of n objects taken r at a time.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.1: Distinguish between discrete random variables and continuous random variables and contrast their probability distributions.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.2: Discuss a probability function, a probability density function, and a cumulative distribution function.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.3: Describe a discrete uniform random variable and a binomial random variable.
|
|
M. Spiegel, Probability, Chapter 2 (Random Vars)
|
LO 2.4: Describe the continuous uniform distribution.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 1.5: Apply the three theorems on expectations for two independent variables.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 1.6: Apply the four theorems on variance for two independent variables.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 1.7: Define and calculate covariance and correlation.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 3.6: Determine the percentage of a distribution that lies a stated number of deviations from the mean using Chebyshev’s inequality.
|
|
M. Spiegel, Probability, Chapter 3 (Math Expectations)
|
LO 3.7: Describe and interpret measures of skewness and kurtosis.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.5: Identify the key properties of the normal distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.6: Calculate probabilities based on a standard normal distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.7: Calculate the expected value and variance of the Poisson distribution.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.8: Compare and contrast the binomial, normal, and Poisson distributions.
|
|
M. Spiegel, Probability, Chapter 4 (Special Prob Distributions)
|
LO 2.9: Contrast the lognormal and normal distributions.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.1: Define a population, a parameter, and a sample.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.2: Construct a frequency distribution, calculate relative frequencies from a frequency distribution, and illustrate the use of a histogram and a frequency polygon to the present data.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.3: Calculate and interpret the following measures: population mean, sample mean, arithmetic mean, geometric mean, mode, and median.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.4: Discuss the properties of the sampling distribution of means, proportions, and differences and sums.
|
|
M. Spiegel, Probability, Chapter 5 (Sampling Theory)
|
LO 3.5: Calculate a sample variance, population variance, and standard deviation.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.1: Define simple random sampling and stratified random sampling and discuss sampling error.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.2: State the central limit theorem and describe its importance.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.3: Calculate and interpret the standard error of the sample mean.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.4: Compare and contrast a point estimate with a confidence interval.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.5: Identify and describe the properties of an efficient estimate.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.6: Calculate and interpret a confidence interval for a population mean, given a normal distribution with a known and unknown population variance.
|
|
M. Spiegel, Probability, Chapter 6 (Estimation Theory)
|
LO 4.7: Calculate a confidence interval for a proportion and for differences and sums.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.1: Explain the difference between a Type I and a Type II error and how the probabilities of Type I and Type II errors are affected by the choice of significance level.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.2: Define the p-value in hypothesis testing.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.3: Determine the appropriate test statistic for both a known and unknown variance of a normally distributed population mean.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.4: Construct a hypothesis and determine whether it should be rejected.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.5: Determine whether two population means are statistically different from each other, assuming each population is normally distributed.
|
|
M. Spiegel, Probability, Chapter 7 (Test of Hypoth & Signif)
|
LO 5.6: Conduct a chi-square test for a single population variance and an equality-of-variance test for two normally distributed populations.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.1: Calculate the standard error of estimate.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.2: Calculate the coefficient of determination.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.3: Conduct a test for significance for regression coefficients, and construct a corresponding confidence interval.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.4: Calculate a predicted value for the dependent variable, given output from a regression model and stated values for independent variables.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.5: Calculate the covariance between two random variables and the covariance for two dependent variables.
|
|
M. Spiegel, Probability, Chapter 8 (Curve Fitting, Regression,...)
|
LO 6.6: Calculate a correlation coefficient, and determine whether it is significantly different from zero.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.1: Explain the derivation of the basic equilibrium formula for pricing commodity forwards and futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.2: Define lease rates, and discuss the importance of lease rates for determining no-arbitrage values for commodity futures and forwards.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.3: Explain how lease rates determine whether a forward market is in contango or backwardation.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.4: Explain how storage costs impact commodity forward prices, and calculate the forward price of a commodity with storage costs.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.5: Explain how a convenience yield impacts commodity forward prices, and determine the no-arbitrage bounds for the forward price of a commodity when the commodity has a convenience yield.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.6: Discuss the factors that impact the pricing of gold, corn, natural gas, and oil futures.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.7: Describe and calculate a commodity spread.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.8: Define basis risk, and explain how basis risk can occur when hedging commodity price exposure.
|
|
McDonald, Derivatives Markets (Commodity Forwards) , Chapter 6
|
LO 30.9: Differentiate between a strip hedge and a stack hedge.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.1: Define a default swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.2: List the ISDA events that trigger a default swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.3: Calculate the cash settlement amount when a reference bond defaults.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.4: Explain the main types of default swaps.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.5: Define and explain the payments of a total rate of return swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.6: Define a credit spread option, including a description of the payoffs for both parties.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.7: Calculate the payoff for a credit spread option and whether the bond holder is over- or underhedged.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 2 (Credit Derivatives Products)
|
LO 53.8: Describe a credit spread forward and a credit spread swap.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.1: Describe a credit-linked note, including risks and benefits.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.2: Explain the structure of a typical cash collateralized debt obligation, including the use of a special purpose vehicle.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.3: Describe the difference between a cash and synthetic CDO.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.4: State the defining characteristics of (a) tranched portfolio default swaps, (b) tranched basket default swaps, and (c) collateralized debt obligation squared.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 3 (Synthetic Structures)
|
LO 54.5: Describe the initial structure, current success, and the relevant differences between BISTRO and J-Port.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.1: Explain which risks each credit derivative hedges.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.2: Calculate and explain the payoff resulting from a TROR hedge of operational risk.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.3: Calculate and explain the yield enhancement on a credit spread option and the underlying debt.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.4: Calculate and explain the benefits of a TROR hedge and credit spread option in cost reduction.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.5: Calculate and explain the profits using TROR, default swaps, and credit spread options to exploit arbitrage opportunities.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.6: List the risk weights under Basel II for sovereigns, banks, and corporations.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 4 (Application of Credit Derivatives)
|
LO 55.7: Calculate and explain the benefits of using default swaps to reduce regulatory capital.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 6 (Risk Management with Credit Derivatives)
|
LO 55.8: Calculate the market VAR for a portfolio of options and the credit at risk for an investment-grade bond.
|
|
Meissner, Credit Derivatives, Application, Pricing & Risk Management; Chapter 6 (Risk Management with Credit Derivatives)
|
LO 55.9: Calculate and explain the CAR for a portfolio and a portfolio hedged with default swaps or total rate of return swaps.
|
|
N. Amenc, Portfolio Theory, Chapter 4 (CAPM)
|
LO 41.1: Calculate, compare, and evaluate the Treynor measure, the Sharpe measure, and Jensen’s alpha.
|
|
N. Amenc, Portfolio Theory, Chapter 4 (CAPM)
|
LO 41.2: Discuss extensions to Jensen’s alpha.
|
|
N. Amenc, Portfolio Theory, Chapter 4 (CAPM)
|
LO 41.3: Calculate and interpret tracking error, the information ratio, and the Sortino ratio.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.4: Compare and contrast the characteristics of arbitrage and empirical multifactor models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.5: Compare and contrast the explicit and implicit factor methods for determining factors in multifactor models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.6: Identify and discuss three categories of multifactor models, and describe how multifactor models can be applied to international portfolios.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.7: Discuss the application of multifactor models to portfolio risk analysis, and describe examples of multifactor risk models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.8: Discuss the application of multifactor models to portfolio performance decomposition, and describe examples of multifactor performance analysis models.
|
|
N. Amenc, Portfolio Theory, Chapter 6 (Multi-factor models)
|
LO 41.9: Compare and contrast returns-based style analysis models with portfolio-based style analysis models.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.10: Identify and discuss two alternatives for modeling a yield curve.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.11: Discuss direct and indirect methods for estimating a range of zero-coupon rates given yields to maturity.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.12: Describe dynamic interest rate models used to estimate a yield curve including the Vasicek model, the Cox-Ingersoll-Ross model, and the Heath-Jarrow-Morton model.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.13: Identify the two primary risks that explain the variation in bond returns, and describe quantitative models used to assess each of these risks.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.14: Describe various strategies employed for managing fixed-income portfolios.
|
|
N. Amenc, Portfolio Theory, Chapter 8 (Fixed-income security investment)
|
LO 41.15: Identify and describe models used to analyze and decompose fixed-income portfolio performance.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.1: Explain the difference between local- and full-valuation methods.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.2: Describe how the addition of second-order terms improves the accuracy of estimates for nonlinear relationships.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.3: Compare the delta normal, historical simulation, and Monte Carlo simulation methods, and explain their appropriate uses.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.4: List the advantages and disadvantages of the delta-normal model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.5: List the advantages and disadvantages of the historical simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 10
|
LO 12.6: List the advantages and disadvantages of the Monte Carlo simulation method.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.1: Describe the two components of the typical VAR model.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.2: Discuss the three qualities of successful futures contracts and why these are desired in the chosen risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.3: Discuss how the residual specific risk is related to the number of risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.4: Explain the three approaches for mapping a portfolio onto the risk factors.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.5: Decompose a fixed-income portfolio into positions in the standard instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.6: Calculate the VAR of a fixed-income portfolio using the delta-normal method, given the expected change in portfolio value and the standard deviation.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.7: Explain why the delta-normal method can provide accurate estimates of VAR for many types of financial instruments.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.8: Discuss why caution must be used in applying delta-normal VAR methods to derivatives and options, and describe when this is appropriate.
|
|
P. Jorion, Value at Risk (3rd), Chapter 11
|
LO 13.9: Explain what is meant by benchmarking a portfolio, and define tracking error.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.1: Discuss the role of stress testing as a complement to the VAR measure, and describe the benefits and drawbacks of stress testing.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.2: Compare and contrast the use of unidimensional and multidimensional scenario analysis.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.3: Compare and contrast the use of prospective scenarios and historical scenarios in multidimensional scenario analysis, and describe the advantages and disadvantages of each.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.4: Discuss an advantage and disadvantage of using the conditional scenario method as a means to generate a prospective scenario.
|
|
P. Jorion, Value at Risk (3rd), Chapter 14
|
LO 15.5: Discuss possible responses when scenario analysis reveals unacceptably large stress losses.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.1: Describe the procedure for simulating a price path using a discrete approximation to geometric Brownian motion.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.2: Identify the four steps in computing VAR using Monte Carlo simulation.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.3: Describe how the Monte Carlo method is used in option pricing.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.4: Discuss the tradeoff between speed and accuracy in Monte Carlo models.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.5: Explain how to account for correlations among the variables in simulations with multiple variables.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.6: Describe two techniques used to simplify the simulation process in simulations with multiple variables.
|
|
P. Jorion, VaR 3rd Edition, Chapter 12
|
LO 14.7: Describe various models of interest rate dynamics.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.1: Define risk budgeting.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.2: With respect to VAR and managing risk on the “buy side” and “sell side” of the investment industry, compare the following characteristics: horizon, turnover, leverage, risk measures, and risk controls.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.3: Summarize the two basic steps of the investment process, and explain two trends in the investment process that have led to a greater need for dynamic risk management. LO 17.4: With respect to hedge funds, explain why risk measurement problems exist. LO 17.5: With respect to investment managers, explain absolute versus relative risk and distinguish between policy mix and active risk. LO 17.6: Explain how VAR can apply to funding risk, and calculate the negative surplus associated with a VAR level of loss. LO 17.7: Define plan sponsor risk and distinguish between economic risk and cash flow risk. LO 17.8: Explain how to use VAR to monitor risk and why it is important in a large firm. LO 17.9: With respect to risk management, explain the pros and cons of having a global custodian. LO 17.10: Discuss the trend towards risk management systems by money managers. LO 17.11: Explain how to use VAR to design better investment guidelines and how to use VAR for the investment process. LO 17.12: Explain how to budget risk across asset classes. LO 17.13: Explain how to budget risk across active managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.4: With respect to hedge funds, explain why risk measurement problems exist.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.5: With respect to investment managers, explain absolute versus relative risk and distinguish between policy mix and active risk.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.6: Explain how VAR can apply to funding risk, and calculate the negative surplus associated with a VAR level of loss.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.7: Define plan sponsor risk and distinguish between economic risk and cash flow risk.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.8: Explain how to use VAR to monitor risk and why it is important in a large firm.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.9: With respect to risk management, explain the pros and cons of having a global custodian.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.10: Discuss the trend towards risk management systems by money managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.11: Explain how to use VAR to design better investment guidelines and how to use VAR for the investment process.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.12: Explain how to budget risk across asset classes. LO 17.13: Explain how to budget risk across active managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 17 (VaR and Risk Budgeting in I/M)
|
LO 17.13: Explain how to budget risk across active managers.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.1: With respect to portfolio risk analysis, define diversified portfolio VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.2: With respect to portfolio risk analysis, define individual VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.3: For a two-asset portfolio, calculate the portfolio VAR when the returns of the two assets have a zero correlation and when the correlation is one (perfectly correlated).
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.4: Calculate the standard deviation and VAR of an equally weighted portfolio of assets whose returns all have the same standard deviation and where the correlations of the returns are all equal for each pair of assets.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.5: With respect to portfolio risk analysis, define marginal VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.6: With respect to portfolio risk analysis, define and calculate incremental VAR, explain why calculating incremental VAR may be difficult, and give a useful approximation.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.7: With respect to portfolio risk analysis, define the variance minimizing allocation or “best hedge” when adding a single risk factor to a portfolio.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.8: Estimate component VAR in a portfolio with a large number of positions and use it to decompose VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.9: Describe ways we can compute component VARs for a distribution of returns that is not normal or elliptical.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.10. Demonstrate how a manager can manage risk by using marginal VARs to make decisions to lower portfolio VAR.
|
|
P. Jorion, VaR 3rd Edition, Chapter 7 (Portfolio Risk)
|
LO 9.11. Explain the difference between risk management and portfolio management, and demonstrate how to use marginal VAR in portfolio management.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.1: Explain how outliers can really be indications that the volatility varies with time.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.2: Explain how to construct a moving average forecast.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.3: Explain how the GARCH estimations can provide forecasts that are more accurate.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.4: Explain how persistence is related to the reversion to the mean.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.5: Explain how an EWMA systematically discounts older data, and identify the RiskMetrics® daily and monthly decay factors.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.6: Explain why forecasting correlations can be more important than forecasting volatilities.
|
|
P. Jorion, VaR 3rd Edition, Chapter 9
|
LO 10.7: Explain how to use option prices to derive forecasts of volatilities and correlations.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.1: List and describe the two overarching principles of the agreement among the President's Working Group on Financial Markets and U.S. Agency Principals on principles and guidelines regarding private pools of capital.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.2: Explain why PWG promotes limiting investors in private pools to only sophisticated investors.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.3: According to the PWG agreement, list the duties of investors in private pools.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.4: According to the PWG agreement, list the duties of fiduciaries that invest less sophisticated investors’ capital in private pools.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.5: According to the PWG agreement, list the duties of key creditors and counterparties.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.6: According to the PWG agreement, list and describe the duties of managers of private pools of capital.
|
|
PWG on Financial Markets, Private Pools of Capital
|
LO 64.7: According to the PWG agreement, list and describe the duties of supervisors.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.1: Identify and discuss the factors that led to the financial crisis at Metallgesellschaft and identify why using a stack-and-roll hedging strategy was ineffective for Metallgesellschaft.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.2: Identify and discuss the factors that led to huge losses at Sumitomo, and describe measures that may have prevented those losses.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.3: Identify and discuss the factors that led to the collapse of Long-Term Capital Management.
|
|
R. Gallati, Risk Management & Capital Adequacy, Chapter 6 (Case Studies)
|
LO 60.4: Identify and discuss the factors that led to the bankruptcy of Barings and risk management measures that may have prevented the bankruptcy.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.1: Compute the contractually promised gross return on a loan given the contractual rate and noninterest charges.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.2: Discuss the relationship between the promised return and the expected return on a loan.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.3: Compute the probability of default for a borrower given a linear probability model and the borrower’s relevant financial variables.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.4: Compute the probability of default (marginal default probability) for one-year corporate debt using Treasury- and corporate-bond yield curves.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.5: Compute the cumulative default probability over a multiyear period given the marginal default probability for each year and compute a marginal default probability using the term structure approach.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 11 (CR: Individual Loan Risk)
|
LO 46.6: Critique the mortality rate approach to deriving credit risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.7: Discuss how migration analysis is used to measure credit risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.8: Compute a concentration limit for a given borrower.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.9: Identify the inputs required to compute the expected return and variance of a loan or bond portfolio.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.10: Illustrate the concept of diversification within a modern portfolio theory framework.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 12 (CR: Loan Portfolio and Concentration Risk)
|
LO 46.11: Explain how loan volume data can be used to measure loan concentration and how loan loss ratios can be used to measure concentration risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.1: Describe the difference between credit risk and sovereign risk.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.2: Describe debt repudiation and debt rescheduling.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.3: Describe the five key economic variables in measuring the probability of rescheduling.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.4: Describe the six major problems of using traditional country risk analysis models and techniques.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 16 (Sovereign Risk)
|
LO 47.5: Describe the different mechanisms for dealing with sovereign risk exposure.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.1: Distinguish between loans that are sold with and without recourse.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.2: Describe two major segments of the loan sales market.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.3: Contrast the characteristics of loans sold as participations and those sold as assignments.
|
|
Saunders, Financial Institutions Management (5th Ed), Chapter 27 (Loan Sales)
|
LO 48.4: Identify the buyers and sellers of loans and briefly discuss their motives.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.1: Compare the economic function of mutual funds and hedge funds and the most basic choices the funds make in achieving that function.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.2: Compare the size of hedge funds and mutual funds and give the reason for the difference in size.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.3: Explain how hedge funds are usually organized and how the organization can help avoid regulation.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.4: Explain the distinction between symmetric compensation and asymmetric compensation and how they apply to the fees paid to the managers of mutual funds and hedge funds.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.5: Describe typical restrictions that hedge fund investors face with respect to withdrawing capital from the fund.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.6: With respect to diversification, explain why it is especially important when investing in hedge funds, and give two reasons why it is difficult.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.7: With respect to diversification, explain how a fund-of-funds can help a hedge fund investor and how hedge funds prove to be a useful tool in a larger portfolio.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.8: Discuss how hedge funds might make markets more efficient.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.9: Compare the returns and volatility of the Credit Suisse/Tremont Hedge Fund index to that of the S&P 500, and the growth of investments in hedge funds to that in mutual funds.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.10: List and explain four reasons why it is difficult to ascertain if individual hedge funds provide a positive abnormal risk-adjusted return.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.11: Cite evidence that hedge funds managers massage their reported returns.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.12: Discuss the alpha of hedge funds.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.13: Explain why regulators are concerned about the risks hedge funds pose to individual investors and institutions, and discuss evidence for the justification for those concerns and the need for increased regulation.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.14: Explain why regulators are concerned about liquidity and volatility risks that hedge funds might introduce into the economy, and discuss evidence for the justification for those concerns and the need for increased regulation.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.15: With respect to the future of hedge funds, explain why their aggregate performance may decline and why they may become more institutionalized and regulated.
|
|
Stulz, "Hedge Funds: Past, Present, Future"
|
LO 45.16: Discuss how trends in hedge funds and mutual funds will lead to mutual funds being more competitive with hedge funds.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.14: Discuss the issues impacting hedging concerns when dealing with exotic options, and explain the use of static option replication in hedging exotic options.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.15: Compare and contrast exchange-traded options, over-the-counter options, dynamic replication, and static replication in regard to their advantages, costs, and risks to the user.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.16: Discuss the various roles that financial intermediaries can take with respect to the derivative products they sell in terms of their risk position and comparative advantage.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.17: Explain how financial engineering and innovation in derivative products can solve risk management problems, and the role of competition in the profitability and availability of new products.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.18: Discuss the reasons that some derivatives are embedded in other securities or bundled with other derivatives.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 15
|
LO 38.19: Given the tradeoffs involved in selecting the optimal derivative instrument or replicating strategy, provide a framework for selecting the optimal instrument or strategy to hedge a particular risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.1: Calculate the value of a firm’s debt and equity and the volatility of firm value using the Merton model.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.2: Discuss the valuation of subordinate debt in the context of option pricing.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.3: Explain how interest rate dynamics and the interaction with firm value affect the price of debt.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.4: Identify difficulties in applying the Merton model to debt valuation, and discuss the results of empirical studies that use the Merton model to value debt.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.5: Calculate probability of default and loss given default.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 18 (Credit Risks & Credit Derivatives)
|
LO 51.11: Define a vulnerable option, and explain how credit risk can be incorporated in determining the option’s value.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.1: Describe how the covariance/correlation of returns between securities affects the returns distribution of a portfolio of securities.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.2: Describe the efficient frontier and the asset allocation decision both with and without the presence of a riskless asset.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.3: Summarize the concepts of beta, the security market line (SML), and the capital asset pricing model (CAPM), and describe how they are related to the determination of the expected return of a security or portfolio of securities.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.4: List the CAPM’s underlying assumptions.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.5: Explain the price of risk, the quantity of risk (beta), and equilibrium theory.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 39.6: Define market efficiency, identify the three forms of market efficiency, and discuss the link between efficiency and the CAPM.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 40.1: Explain why strategies that reduce the firm’s diversifiable risk do not increase firm value.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 40.2: Differentiate between firm strategies and policies to reduce the firm’s systematic risk that will increase firm value and those that will not.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 2 (Investors & Risk Management)
|
LO 40.3: Using the concepts of arbitrage and investor hedging, demonstrate that hedging a firm’s price risk with respect to its output will not affect firm value
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.4: Explain the circumstances under which risk management can reduce the present value of potential costs of financial distress.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.5: Explain why risk management may lower a firm’s tax bill, incorporating the ideas of tax carryforwards and carrybacks.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.6: Demonstrate how risk management may increase firm value by changing the optimal capital structure of the firm.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.7: Describe the circumstances under which the value of the firm may be increased or decreased by risk reduction that benefits a large shareholder.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.8: Explain the relationship between risk management, managerial incentives, and the structure of management compensation.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.9: Describe debt overhang, and explain how risk management can increase firm value by reducing the probability of debt overhang.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 3 (Creating Value with Risk Management)
|
LO 40.10: Explain how risk management can reduce the problem of information asymmetry and increase firm
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.1: Calculate cash flow at risk for a firm with normally distributed cash flows for any period, given the expected return and volatility of firm value, and interpret the CFAR measure.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.2: Describe the characteristics of firms for which either VAR or CFAR is the more appropriate measure of risk.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.3: Given the cost per dollar of VAR and the relevant betas, expected returns, and correlations, calculate the VAR impact and expected net gain of a project/trade that is not large relative to the firm’s portfolio of projects.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.4: Evaluate the impact of a project that is large relative to the firm’s portfolio of projects on CFAR, and explain how the cost of additional CFAR impacts the capital budgeting decision.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.5: Explain how to allocate CFAR and VAR to the existing activities of the firm and how to use these allocations to improve the evaluation of the economic profitability of these activities (projects, divisions, and trading).
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.6: Discuss how a firm can reduce the cost of VAR/CFAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 4
|
LO 8.7: Explain the limitations on project selection and the use of derivative instruments as ways to decrease VAR/CFAR.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.7: Distinguish among transaction exposure, contractual exposure, and competitive exposure to exchange rate fluctuations.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.8: Explain the interaction of price risk and quantity risk in terms of the additional challenges to hedging using examples of industries where the association between price and quantity of the risky factor is negative and where it is positive.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.9: Explain the implications of perfect positive correlation, zero correlation, and perfect negative correlation between price risk and quantity risk for the optimal hedge ratio and the risk of the hedged versus the unhedged cash flows.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.10: Describe how the exposure of cash flow to a risk factor, such as exchange rate risk, is measured.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.11: Using supply (marginal cost) and demand analysis, illustrate the competitive exposure to exchange rate risk for an exporting firm, considering changes in (i) exchange rates between the firm’s currency and the currency of the importing country and (ii) exchange rates between the currency of a third country (that has exporters that compete with the firm) and the currency of the importing country.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.12: Outline the steps in determining cash flow exposure from a pro forma analysis when the correlation of the quantity sold with the risk factor is zero, positive, and negative.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.13: Explain how the optimal hedge ratio is determined in the context of pro forma cash flow analysis with one risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.14: Illustrate the concept of the delta exposure of cash flow, and describe how it is estimated in practice for non-linear exposure to a risk factor.
|
|
Stulz, Risk Mgmt & Derivatives, Chapter 8
|
LO 19.15: Describe the steps in using Monte Carlo simulation to estimate the volatility-minimizing hedge ratio and the circumstances under which this approach has significant advantages.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 21.1: Compare and contrast the structure of Treasury coupon bonds and Treasury STRIPS, and differentiate between P-STRIPS and C-STRIPS.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.5: Describe the arbitrage trade necessary to exploit violations of the law of one price, and compute the profit or loss of the arbitrage strategy.
|
|
Tuckman, Fixed Income Securities, Chapter 1
|
LO 22.6: Use the discount function to determine whether a bond is trading cheap or rich.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.2: Calculate a series of spot rates given the appropriate discount factors or STRIPS prices.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.3: Calculate forward rates from a series of spot rates.
|
|
Tuckman, Fixed Income Securities, Chapter 2
|
LO 22.4: Calculate the price of a bond using discount factors, spot rates, or forward rates.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.1: Describe the basic features of a fixed rate, level payment mortgage, including the prepayment option.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.2: Discuss the factors that affect mortgage prepayments.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.3: Discuss the advantages and disadvantages of static cash flow models, implied models, and prepayment models.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.4: Describe the characteristics of the price-rate curve of a mortgage pass-through security.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.5: Describe the prepayment risk of planned amortization class (PAC) bonds, support bonds, principal only (PO) strips, and interest only (IO) strips.
|
|
Tuckman, Fixed Income Securities, Chapter 21 (MBS)
|
LO 26.6: Describe the Monte Carlo simulation method for valuing mortgage-backed securities.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.2: Calculate a bond’s yield to maturity (YTM) using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.3: Calculate the price of an annuity and a perpetuity using a calculator with time value functions.
|
|
Tuckman, Fixed Income Securities, Chapter 3
|
LO 21.4: Describe the price of a bond relative to its par value when (i) coupon rate = YTM, (ii) coupon rate > YTM, and (iii) coupon rate < YTM.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.5: Calculate the accrued interest and invoice price on a coupon bond.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 21.6: Calculate simple, semiannual, monthly, daily, and continuously compounded rates given a discount factor or market interest rate for a specified interval.
|
|
Tuckman, Fixed Income Securities, Chapter 4
|
LO 22.7: Explain the linear yield interpolation and piecewise cubic methods for estimating complete discount functions.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.1: Calculate the dollar value of an 01 (DV01) of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.2: Calculate the face amount of one security required to hedge a position in a second security, given the DV01 of each.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.3: Calculate and interpret the effective duration of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.4: Calculate and interpret the convexity of a security, given a change in yield and the resulting change in price.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.5: Estimate the price change of a security given the DV01, the duration, and the convexity.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.6: Interpret convexity in the contexts of investment management and asset-liability management.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.7: Calculate the duration of a portfolio.
|
|
Tuckman, Fixed Income Securities, Chapter 5
|
LO 23.8: Interpret the impact of changes in maturity, yield, and rating on a bond’s duration.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.9: Define, interpret, and calculate the yield-based DV01, the modified duration, and the Macaulay duration of a security.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.10: Explain how Macaulay duration and DV01 vary with changes in coupon rate, maturity, and yield.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.11: Explain how yield-based convexity changes for changes in maturity.
|
|
Tuckman, Fixed Income Securities, Chapter 6
|
LO 23.12: Describe the construction of a barbell and a bullet portfolio, and compare and contrast the convexity of the two portfolios.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.1: Describe the major weakness attributable to single-factor approaches when hedging portfolios or implementing asset liability techniques.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.2: Define the key rate shift technique in multifactor hedging applications, and discuss four appealing characteristics of this approach.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.3: Calculate the key rate exposures for a given security.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.4: Calculate the appropriate hedging positions required given a specific key rate exposure profile.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.5: Discuss why hedges based on key rates only approximate an immunized position in the underlying assets.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.6: Explain the main differences between using the key rate shift approach and the bucket shift approach for managing interest rate risks.
|
|
Tuckman, Fixed Income Securities, Chapter 7 (Key Rate)
|
LO 24.7: Explain how key rate and bucket analysis may be applied in estimating portfolio volatility.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.1: Calculate the value of a derivative on a fixed-income security, given an interest rate tree and the risk-neutral probabilities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.2: Discuss the advantages and disadvantages of reducing the size of the time steps.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.3: Explain why the Black-Scholes-Merton model is not appropriate for valuing derivatives on fixed-income securities.
|
|
Tuckman, Fixed Income Securities, Chapter 9 (Term structures)
|
LO 25.4: Explain the impact of embedded options on a fixed-income security’s price.
|
|