What is the Basel Committee for Banking Supervision? The Basel Committee on Banking Supervision is a committee of banking supervisory authorities, which was established by the central bank governors of the Group of Ten (G10) countries in 1975. It consists of senior...read more
CFA Exam Results for June 2010 are out. For Level 1, Pass rate is 42%. That's up from 34% in Dec. '09 and down from 46% in June '09. For Level 2, Pass rate is 39% We would like to congratulate everyone who has passed the exam. For others, best of luck for the December...read more
We are happy to announce the launch of our eBook, Risk Management Essentials. And yes, this eBook is completely free. About This eBook The management of risk has emerged as the key challenge for every participant in the financial markets. Risk management is at the...read more
According to CFA Institute, the CFA charter provides you with a strong foundation for a variety of career choices in the investment profession. It opens up opportunities in various areas such as portfolio management, investment research, advisory services, and investment banking careers.read more
In order to work with quantitative sections of the study material, it is important that you be able to work with a financial calculator. The exam questions are construction with the assumption that the candidates have the ability to work with a financial calculator. CFA Institute allows two types of calculators in the exam.read more
Computing VaR with Monte Carlo Simulations very similar to Historical Simulations. The main difference lies in the first step of the algorithm – instead of using the historical data for the price (or returns) of the asset and assuming that this return (or price) can re-occur in the next time interval, we generate a random number that will be used to estimate the return (or price) of the asset at the end of the analysis horizon.read more
In the previous post, we learned the algorithm to compute VaR using Monte Carlo Simulation. Let us compute VaR for one share to illustrate the algorithm.
We apply the algorithm to compute the monthly VaR for one stock. We will only consider the share price and thus work with the assumption we have only one share in our portfolio. Therefore the value of the portfolio corresponds to the value of one share.read more
Recently, the Global Association of Risk Professionals (GARP) started a new certification program for energy risk professionals. This article provides an overview of the ERP certification, its benefits and the uniqueness of the program.
An energy risk professional is someone who deals with the diverse range of energy commodities and is responsible (directly or indirectly) for managing the risks inherent in dealing with these commodities.read more
The fundamental assumption of the Historical Simulations methodology is that you base your results on the past performance of your portfolio and make the assumption that the past is a good indicator of the near-future.
The below algorithm illustrates the straightforwardness of this methodology. It is called Full Valuation because we will re-price the asset or the portfolio after every run. This differs from a Local Valuation method in which we only use the information about the initial price and the exposure at the origin to deduce VaR.read more
We earlier saw how VaR can be calculated using the parametric method. We will now look at this method in detail, and also understand how VaR can be easily calculated using matrices. VaR of a Single Asset VaR of a single asset is the value of the asset multiplied by...read more