Saturday, August 25, 2012

Market Risk Credit Risk FRM L2 (Book1) Prep Strategy Info [Learn FRM using MATLAB/R/VBA]

Market Risk FRM L2

Three most interesting areas in Market Risk Uni variate and Multi Variate :
  1. EVT
  2. Multi Variate Models
  3. Back Testing
  4. Monte Carlo
  5. Copula

4 Chapters in which the area is divided:
  1. Uni variate
  2. Multivariate
  3. Volatility
  4. MBS: OAS, etc. Pre payment, trenching, etc

The first two might be theoretical and more maths, but the last 2 are seen extensively in the market. Volatility index is something which is often seen and an important area.

Credit risk
A highly practical subject
  1. Includes CDO, CDS, pre payments, etc
  2. default probability and CDS
  3. sovereign rating: GDP, currency and debt of the nation
  4. measuring default from market prices
  5. spread and default
  6. merton model
  7. currency swap interest rate swap
  8. CDO structure trenching: junior senior

Other topics
Hedge fund risk / portfolio risk


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