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Videos from “bionicturtledotcom” (25 video results)
Stylized balance sheet of depository institution to illustrate (1) high leverage, (2) dependency on spread (ROA - COF) and (3) key ratios: leverage, and Basel's Tier 1 leverage ...
A snapshot of claims (right-hand side: liabilities + shareholders) on company assets (left-hand side: will convert to cash now or later). Three points: 1. equity is residual ...
This is the classic, but difficult idea, that offers an explanation for why we expect the forward price to be less than the expected future spot price: F less than E[future ...
The Gaussian copula was gainfully employed prior to the credit crisis, and it has pretty much been shamed. Mathematically, it's an elegant way to join marginal distributions ...
ES is a complement to value at risk (VaR). ES is the average loss in the tail; i.e., the expected loss *conditional* on the loss exceeding the VaR quantile.
Tracking error (TE) is the standard deviation of the difference between portfolio returns and benchmark returns. The review ex ante and ex post TE and (briefly) TE VaR.
APT is similar to CAPM but with several factors
Here I use Mathetmatica to illustrate how the first derivative of the price of a zero-coupon bond (with respect to yield) is the dollar duration of the bond. Notice that ...
A covariance matrix, in finance, is a square matrix that contains covariances between portfolio assets. Because, for example, the element in row 2/column 2 is an assets covariance ...
If we apply the square root rule (i.e., variance scales with time), we assume returns are i.i.d., which is not realistic. Here is a scaling factor that adjusts for autocorrelation....
A normal mixture distribution can model fat tails
Typical application of random normal variable: what is probability that asset return will be negative?
log returns
In MG, the underlyings were short positions in long-term forward contracts to deliver oil. The hedge was a stack-and-roll hedge: long positions in short-term futures contracts ...
Surplus as risk is value at risk (VaR) for a pension fund.
The best hedge is based on portfolio volatility in the mean-variance framework. Specifically, 1. Given a current portfolio with value (W), and 2. Given an asset (A) with ...
RAPMs are variations of: return per unit of risk. Treynor and Sharpe are similar: both are excess return per unit of risk. Treynor defines risk as systematic risk (beta) ...
The security market line (SML) plots the expected return of an asset (or portfolio) as a function of the asset's beta.
The capital market line is determined by a mix of: the riskfree asset and the market portfolio. The market portfolio, in turn, consists of all risky assets (this example ...
This is a review which follows Jorion's (Chapter 7) calculation of marginal value at risk (marginal VaR). Marginal VaR requires that we calculate the beta of a position with ...
The very traditional (mean-variance) two asset portfolio volatility is largely a function of asset correlation/covariance.
The next building block is mapping transitional probabilities to standard normal variables; then using a bivariate normal to capture joint probabilities of default
The bivariate normal distribution (common in credit risk) gives the joint probability for two normally distributed random variables
A review of the method used in the first building block of CreditMetrics, a ratings-based credit risk portfolio model
The key idea in valuing a CDS is a fair deal: the (probability-adjusted) expected PAYMENTS (i.e., made by protection buyer) should equal the expected PAYOFF (contingent, ...
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