1.

1. Arithmetic Return= (Pt+Dt-Pt-1)/Pt-1 where Pt and Pt-1 are prices at

time t and t-1 resp. and Dt is the dividends flow between time t-1 and t
2. Geometric Return= ln([Pt+Dt]/Pt-1)
3. delta normal VaR(alpha%)= [-mean(returns)
+stdDev(returns)*z(alpha%)]*Pt-1 where Pt-1 is initial portfolio
position ...remember this is absolute Var
4. Lognormal VaR(alpha%)= [1-exp[mean(returns)stdDev(returns)*z(alpha%)]]*Pt-1
5. Standard error of Quantile se(q)= sqrt[p(1-p)/n]/f(q)
6. Generalized Extreme Value Distribution(GEV) :
F(X|E,mean,stdDev)= exp[-[1+E*((x-mean)/stdDev)]^(-1/E)] ;E=shape
parameter of tail !=0
F(X|E,mean,stdDev)= exp[-exp((x-mean)/stdDev)] ;E=shape parameter
of tail =0
7. Generalized Pareto Distribution(GPD):
1-[1+(E*x/beta)]^(-1/E) ;E=shape parameter of tail !=0
1-[exp(-x/beta)] ;E=shape parameter of tail =0
8. Var Using PoT VaR= u+(beta/E)[[(n/Nu)*(1-CL)]^-E - 1] where u is the
upper limit for losses. CL is confidence level, Nu no of losses above u
and total no of observations is n
9. Expected Shortfall Using POT parameters
ES= VaR/(1-E) + (Beta-E*u)/(1-E)
10. Yield based DV01= (1/10000)*[(Sum of PV(weighted time) of Bond's
Cash flows)/(1+periodic yield)]
11. Modified Duration= 1/P*(1/1+periodic yield)*(Sum of PV(weighted
time) of Bond's Cash flows)
12. Macualay duration= (1+periodic yield)* Modified Duration
13.Mortgage payment(monthly)= MB0*[r/1-(1+r)^-T] where r is
monthly interest rate and MB0 is original loan balance ,T is loan
maturity
14. Loan to Value ratio= Current Mortgage Amount/Current Apprised
Value
15. Single monthly Mortality Rate, SMM= 1-(1-CPR)^1/12 where CPR is
current prepayment rate
16. Bond Equivalent yield=2*[(1+monthly CF yield)^6-1]
17.option Cost= Zero Volatility Spread- Option Adjusted Spread
18. Put call parity: p+S=c+X*e^(-Rf*T)
19.Information ratio= [Rp-Rb]/std Dev(Rp-b) where Rp is portfolio

return, Rb is benchmark return, std Dev(Rp-b) is active risk and Rp-Rb is

active return
20. Risk Aversion= Information Ratio/2*Active risk
thats the first half wait for more
thanks
ShaktiRathore, May 11, 2013
#3
2.

ShaktiRathoreActive Member
Here are the rest of the lot for the part II,
21.Marginal Contribution to value added= Alpha of asset- 2*Risk Aversion* Active
Risk*Marginal contribution to active risk
22.Average Log Return= ln(1+r1)+ln(1+r2)+ln(1+r3)+................ln(1+rT)/T
23. Alpha and IR test: t(alpha%)= alpha-0/SE(alpha) and t(IR)= IR-0/S.E.(IR)
24. Sharpe Ratio t-Test; t=[MERp/stdDev(p)]-[MERb/stdDev(b)]/sqrt(2/N) where MER is mean
excess return
25. Active portfolio return= Rpa= beta(pa)*Rb+[Xpa1*Rf1+Xpa2*Rf2....Xpan*Rfn]+Spar
where beta(pa) is sensitivity to benchmark,X are factors sensitivities to portfolio and s is
unsystematic risk
26. Fama French three factor model: Ri,t= Rf,t + alphai + Betai,m*[E(Rm)-Rf,t]+
Betai,smb*[E(SMBt)]+ Betai,hml*[E(HMLt)]
27. Total Active Systematic Return=Expected Active beta return+ Active beta surprise+
Active benchmark timing return
28. Liquidity Duration= Q/.1*V where Q is no of shares of security, V is volume of security
29. Diversified VaR= z*stdDev(p)*P ;P is portfolio value
30. Individual VaR=z*stdDev(i)*wi*P ;wi is weight of individual security i
31. VaR of Two Asset Portfolio=
z*P*sqrt[w1^2*stdDev1^2+w2^2*stdDev2^2+2w1w2*stdDev1*stdDev2*correlation(1,2)]
for securities 1 and 2
32. Covariance(1,2)=stdDev1*stdDev2*correlation(1,2)
33. Undiversified VaRp=VaR1+VaR2
34. std Deviation of equally weighted portfolio of n securities with equal stdDeviation stdDev
and correlation rho
stdDeviation of portfolio= stdDev *sqrt[1/n+(1-1/n)*rho]
35.Marginal VaRi= (VaR/P)*Betai
36. Component VaR= VaR*Betai*wi

37.Return on surplus=change in surplus/Assets=(change in Assets- change in

Liabilities)/Assets=Rasset-Rliabs.*(Liabs/Assets) where Surplus = Assets- Liabilities
38. Probability of Default, PD= CS/1-RR where CS is spread of corporate bond wrt Rf and RR
is expected recovery rate
39. Risk neutral probability of default= 1-[(1+Rf)/(1+y)] where Rf is risk free rate and y is
yield on Bond
40. Cumulative probability of default(2yrs)= 1-{(1-PD1)*(1-P(Default in yr2|no default in yr
1))}
41. Merton Model, Payment to Debtholder= Dm- max(Dm-Vm,0) and Payment to
Stockholder= max(Vm-Dm,0)
42. Distance to default= [expected Asset return-default threshold]/stdDev(exp asset returns)
43. Distance to Default(lognormal Distribution)= [log(V/defaultThreshold)+
[E(ROA)-.5*stdDev^2]*Maturity]/stdDev*sqrt(Maturity) where V is value of firm assests,
stdDev is stdDeviation of firm assets, E(ROA) is expected return on assets
44. Portfolio Unexpected Loss of two asset portfolio ULp=
sqrt[UL1^2+UL2^2+2*UL1*UL2*correlation(1,2)]
45. Risk Contribution=RC1= UL1*[UL1+UL2*corr(1,2)]/ULp ;RC2=
UL2*[UL2+UL1*corr(1,2)]/ULp so that RC1+RC2=ULp
46.Mean Loss Rate=PD(1-RR)= PD*LGD
47. Credit spread= -[(1/T-t)*ln(D/F)]-Rf where T-t is remaining maturity, D is current value of
debt, F face value of debt and Rf is risk free rate
48. Vasicek Model: change in interest rate r= speed of reversion of r*(k-r(t))*small change in
time t+ stdDev of r* random error term
ShaktiRathore, May 11, 2013
#4

o
3.

Like x 1

ShaktiRathoreActive Member
here are rest to
49. Merton Models: PD=N{[ln(F/V)-mean*(T-t)+.5*stdDev^2*(T-t)]/stdDev*sqrt(T-t)}
50. LGD= F*PD-V*exp(mean*(T-t))*N(d)
51. Vulnerable option= (1-PD)*c +PD*RR*c
52. CDS Spread; PV of payoff =s* PV of payments => s=PV of payoff/PV of payments
53. RAROC= [Revenues-Expected Loss-Expenses+Return on Economic capital+/-transfer
price]/Economic Capital
54. Economic Capital= Operation VaR-EL=Unexpected Loss
55. Adjusted RAROC= ARAROC= RAROC-Rf/Beta(eqty)
56. spread= (Ask price-Bid Price)/.5*(Ask price+Bid Price)

57. Liquidity Adjusted VaR=LVaR= V*z*stdDev+ .5*V*spread where V is asset value

58. LVaR/VaR= 1+[spread/2*(1-exp(-stdDev*z)]
59. Elasticity=E= (change in P/P)/(change in N/N)
60. LVaR= VaR*(1-change in P/P)=VaR*(1-E*change in N/N)
61. LVaR/VaR|comb.=LVaR/VaR|exog. *LVaR/VaR|endo.
62. Capital Ratio= Total Capital/Total Risk weighted Assets
63. Capital Requirement(K)= [Conditional EL-EL]*maturity Adjustment
64. Liquidity Coverage ratio= Stock of highly Liquid Assets/Total net cash outflow over next
30 days
65. net stable funding ratio= Available amount of stable funding/Required amount of stable
funding
66. Stressed VaR= max(SVaRt-1, m*SVaRavg.) where m is a factor
67. EL= PD*LGD