Summary
Summary FRM 1 BOOK 3 FORMULAE SHEET
- Course
- Institution
THIS BOOK WILL PROVIDE YOU ALL THE FORMULAES FROM BOOK 3 OF FRM PAR T HANDY
[Show more]
Seller
Follow
riddhikirange
Content preview
Falconedufin.com/WhatsApp: +91 9096131868m
.co
fin
e du
on
lc
Fa
, Falconedufin.com/WhatsApp: +91 9096131868
Ratio for insurance firm 1. 𝐶𝑜𝑚𝑏𝑖𝑛𝑒𝑑 𝑅𝑎𝑡𝑖𝑜: 𝑙𝑜𝑠𝑠 𝑟𝑎𝑡𝑖𝑜 + 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 𝑟𝑎𝑡𝑖𝑜
Use case:
Combined ratio is used to find 2. 𝐶𝑜𝑚𝑏𝑖𝑛𝑒𝑑 𝑅𝑎𝑡𝑖𝑜 𝑎𝑓𝑡𝑒𝑟 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠: 𝐶𝑜𝑚𝑏𝑖𝑛𝑒𝑑 𝑅𝑎𝑡𝑖𝑜 +
out total impact of loss ratio
and expense ratio. 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠
Note:
Multiple variation of same 3. 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑟𝑎𝑡𝑖𝑜:
formula is possible. But basic
framework remains the same. 𝐶𝑜𝑚𝑏𝑖𝑛𝑒𝑑 𝑅𝑎𝑡𝑖𝑜 𝑎𝑓𝑡𝑒𝑟 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 – 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Net asset value of fund 4. 𝑁𝑒𝑡 𝑎𝑠𝑠𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 ∶ 𝑁𝐴𝑉 =
m
Use case:
Calculation of net asset value
of mutual fund.
.co
Note:
You can expect direct
question on this concept.
Payoff of option 5. 𝐶𝑎𝑙𝑙 𝑜𝑝𝑡𝑖𝑜𝑛 𝑝𝑎𝑦𝑜𝑓𝑓: 𝐶 = 𝑚𝑎𝑥 (0, 𝑆 − 𝑥)
Use case:
5 Call option payoffs
6 Put option payoff.
fin
6. 𝑃𝑢𝑡 𝑜𝑝𝑡𝑖𝑜𝑛 𝑝𝑎𝑦𝑜𝑓𝑓: 𝑃 = 𝑚𝑎𝑥(0, 𝑋 − 𝑆 )
Using this combination of
du
formula, you can get question
on payoff calculation of
option strategy.
e
Note:
Payoffs can not be negative in
on
case of plain vanilla option
but it is possible in case of
barrier option.
lc
Forward contract payoff 7. 𝐹𝑜𝑟𝑤𝑎𝑟𝑑 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡 𝑝𝑎𝑦𝑜𝑓𝑓: 𝑝𝑎𝑦𝑜𝑓𝑓 𝑝𝑎𝑦𝑜𝑓𝑓 = 𝑆 − 𝑘
Use case:
Fa
Forward contract payoff 𝑊ℎ𝑒𝑟𝑒
calculation. 𝑆 = 𝑠𝑝𝑜𝑡 𝑝𝑟𝑖𝑐𝑒 𝑎𝑡 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦
𝑘 = 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑝𝑟𝑖𝑐𝑒
Basis Risk 8. 𝑏𝑎𝑠𝑖𝑠 = 𝑆 − 𝐹
Use case: Finding basis of
forward/future contract. 𝑊ℎ𝑒𝑟𝑒
Note: Understand concept of 𝑆 = 𝑐𝑎𝑠ℎ (𝑜𝑟 𝑠𝑝𝑜𝑡) 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑢𝑛𝑑𝑒𝑟𝑙𝑦𝑖𝑛𝑔 𝑎𝑠𝑠𝑒𝑡 𝑎𝑡 𝑡𝑖𝑚𝑒
widening of the basis risk, 𝐹 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑓𝑢𝑡𝑢𝑟𝑒𝑠 𝑐𝑜𝑛𝑡𝑟𝑎𝑐𝑡 𝑡
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller riddhikirange. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R145,55. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
85651 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now