2024 FRM Exam Part I Valuation and Risk Models PDF
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Course
Valuation and Risk Models
Institution
Valuation And Risk Models
The "2024 FRM Exam Part I – Valuation and Risk Models PDF" by GARP (Global Association of Risk Professionals) is the definitive guide for mastering the valuation techniques and risk modeling concepts required for the FRM Exam Part I. This manual offers a comprehensive exploration of valuation met...
Chapter 1 Measures of Chapter 2 Calculating and
Financial Risk 1 Applying VaR 15
1.1 The Mean-Variance Framework 2 2.1 Linear versus Nonlinear
Combining Investments 2 Portfolios 16
The Efficient Frontier 3 2.2 Historical Simulation 17
1.2 The Normal Distribution 5 2.3 Portfolio Valuation 19
1.3 VaR 6 2.4 Term Structures 20
1.4 Expected Shortfall 8 2.5 Stressed Measures 20
1.5 Coherent Risk Measures 8 2.6 The Delta-Normal Model 21
Weighting and Spectral Risk Measures 9
2.7 Limitations of Delta-Normal
Summary 10 Model 21
Questions 12 2.8 Monte Carlo Simulation 23
Short Concept Questions 12
2. 9 Estimating Parameter Values 24
Practice Questions 12
2.10 Correlation Breakdown 24
Answers 13
Short Concept Questions 13 2.11 Worst Case Analysis 24
Solved Problems 13 Summary 24
Questions 25
Short Concept Questions 25
Practice Questions 25
iii
, Answers 26 4.2 Historical Performance 44
Short Concept Questions 26 Hazard Rates 46
Solved Problems 26
4.3 Recovery Rates 47
4.4 Credit Spreads and Risk
Chapter 3 Measuring and Premiums 47
Monitoring 4.5 The Rating Process 47
Volatility 27 Outlooks and Watchlists 48
Rating Stability 48
3.1 Deviations from Normality 28 Through-the-Cycle versus Point-in-Time 48
Industry and Geographic Consistency 48
3.2 Unconditional and Conditional
Normality 29 4.6 Alternative to Ratings 49
Slow Changes versus Regime Switching 29
4.7 Internal Ratings 50
3.3 How Is Volatility Measured 30
4.8 Rating Transitions 50
Using the Absolute Value of Returns 30
3.4 Estimating the Current Volatility 31 4.9 Are Credit Rating Changes
Exponential Smoothing 31
Anticipated? 51
Determining A 32 4.10 The Rating of Structured
Historical Simulation 33 Products 52
Alternative Weighting Schemes 34 Summary 52
3.5 GARCH 34 Questions 53
Mean Reversion 35 Short Concept Questions 53
Long Horizon Volatility 35
Practice Questions 53
3.6 Implied Volatility 36
Answers 54
3.7 Correlation 36 Short Concept Questions 54
Summary 37 Solved Problems 54
Questions 38
Short Concept Questions 38
Practice Questions 38 Chapter 5 Country Risk:
Answers 39 Determinants,
Short Concept Questions 39 Measures, and
Solved Problems 39
Implications 55
Chapter 4 External and Internal
Credit Ratings 41 5.1 Evaluation of Risk 56
GDP Growth Rates 56
Political Risk 57
4.1 Rating Scales 42 Legal Risk 59
Long-Term Ratings 43
The Economy 60
Short-Term Ratings 43
iv ■ Contents
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