1.

5 1management information
2 3resoure allocation 4performance evaluation 5
2.
3.

4. carrying cost forward price F0 = ( S 0 I )e I

rt

qt
5. forward contract V = S 0 e Ke rt cash flow

rt
V = S 0 Ke .S spot priceK

6. beta N = ( ) P
*
,
A
P A

7. portfolio portfolio

portfolio beta
future

S
8. h = (S , F ) ,
F

delta N( d 1 ) delta-gamma

netrual

9. cost of carry F0 = ( S 0 + U )e ,U
rt

10. E ( ST ) > F0 , normal backwardation

F0 > E ( S T ) Contago spot

price contago
contago
11. basis

1

12.
3 FRA
100 FRA OTC 98

P * DP
N=
FC * D F

13. P FC D

1r2
14. F1 / 2 = X 1 / 2
1 + r1
15. cash price
16.

17. implied forward rate
18. costantdistermintic,

19. convexity Adjustment

=0.5* * t1 * t 2
2

t1 t 2

00
20. T-Bond actual/actual US CORPORATE MUNICIPAL bond
30/360T-bill ACTUAL/360
21. CF
CTD, cost
pricefuture quoteCFCF CF
6 6CTD
00 , CF

22. Vanilla
floating=L**
fix=L**

1m pay6 libor, 6%

2
 15 3915 libor3 5.4%9 5.6%15
5.8%.libor last payment date 5%
PMT=1000000*3%=30000.

B fix = (30000 * e ( 0.054*0.25) ) + (30000 * e ( 0.056*0.75) ) + (1030000 * e ( 0.058*1.25) ) = 1016332

B floating = (notional + (notional * r fixed / 2) * e rt = (1m + (1m * 0.05 / 2) * e 0.054*0.25 = 1011255

libor
23.

Vswap (USD) = BUSD ( S 0 * BGBP )

BUSD S

24. FRA bond bond

FRA
pay off rate rateterm
FRA 3 6 libor 4 5 FRA 8
libor 5m 3 6 FRA

1.05 2
3 6 LIBOR: 1 = 0.06 ,
1.04
4*(EXP(0.06/4)-1)=0.0605.
5m0.08-0.0605*exp(-0.05*0.5) FRA
FRA LIBOR
pay 0ffL*R(receive)R*(T2-T1)

Value(receiveRk = L * ( RK R) * e R2 *T2

25.
Exchang-traded option

26.
27.

S, r X T

T
28.

max(0, X S ) c Xe
rt

3
 rt
S 0 X C P S 0 Xe c

rt
pS-X e dividend

dividends
rt
S-X e

S-X

29. actuarial
0
30. Delta
Delta 1 Gammarho
Vega 0Gamma Delta
gamma
at-the-money at the money Gamma
Gamma Vega
Gamma at the money Vega
Vega ,Vega Rho
R

31. delta N( d 1 )

ln( S O / X ) + (r + 2 / 2)T
N( d 1 ) N( d 1 ) N ( ) , excel
T

NORMSDIST() N( d 1 ) 1

t 1
32. 1U = e ,D = 2
U
e rt D
u = , d = 1 u 3
U D

cu u + c d d
Vc =
e rt

33.

callput parity

4
34.

35. x dx = a( x, t )dt + b( x, t )dz G x

G G b 2 2 G
dG = ( a + + )dt + bG / xdz
x t 2x 2
36. S GBM LnS
dS
= dt dz G=Ln S
S
G G b 2 2 G
dG = (a + + )dt + bG / xdz
x t 2x 2

G G (S ) 2 2 G
dG = (uS + + )dt + SG / Sdz
S t 2S 2

= (u 2 / 2)dt + dz

dLn( S ) = Ln( S T ) Ln( S 0 ) = Ln( S T / S 0 ) ,

S
Ln T L N [(u 2 / 2)T , T ]
S0

LnST L N [(u 2 / 2)T + Ln( S0 ), T ]

(u / 2) S T
2

E( S T )= S 0 * e uT
x x

lnx
2
( + )
E ( X ) = e , V ( X ) = e ( 2 + 2 ) e ( 2 + ) E( S T )= S 0 * e uT
2 2
2

37.

dilution

38.

5

Covered Call


Protective put strategy

p + S = c + Xe rt

Bull spread (
)





Bear spread



Butterfly spread



Calendar spread



Straddle


Strangle staddle straddle


Strips


Strap

6
39. B-S

c = ( S 0 Qe rt ) N (d1 ) Xe rt N (d 2 )

40. =

c = S 0 e qt N (d1 ) Xe rt N (d 2 )

ln( S 0 / X ) + (r q + 2 / 2)T
d1 = d 2 = d1 T
T
q
rf t
c = S0e N (d1 ) Xe rt N (d 2 )

ln(S 0 / X ) + (r r f + 2 / 2)T
d1 = d 2 = d1 T
T
q r S F

c = F0 e rt N (d1 ) Xe rt N (d 2 )

ln( S 0 / X ) + ( 2 / 2)T
d1 = d 2 = d1 T
T
41. delta-neutral
Gamma-Delta neutral
Gamma Gamma delta , Gamma-Delta
neutral
42.
1987
CRASHOPHOBIASticky rule


43. flex LEAPSlong term equity
anticipation securities LEAPS
Package


Forward start option
Compound option
Chooser option
Barrier option,down-and-out put

7
 volatility


Binary option

Look back
Shout option
Asian option

Basket option
44.

45. heating degree days HDD cold degree day CDD
HDD=max(0,65-A)
CDD=max(0,A-65) A
acummulative CDD,
31
CAT
46. monotonicity,
translation invariance, homogeneity subadditivity
VaR VaR

1 1
47. se(u ) = se( ) =
T 2T
(SEE, Standard error of the estimate)
n

SEE
(Y i Yi ) 2
2

SEE = se = = i =1
=
2 i

n2 n2 n2
48. 1 2

VaR

49. relative VaR= x - x 0 ) ( x - x 0 ) , VaR

VaR
50. risk map is a plot of expected loss frequency against expected severity
for each risk type or line of business
Delta-normalVAR
delta Delta-normalVAR
VAR vaR
51. MC

deterministric

8
 1 / k

1 / k


52. drt = k ( rt )dt + rt dz t k

0.5 CIR CIR

Vasieck CIR
Vasieck 0

drt = k ( rt )dt + dz t

1 brennan schwartz

drt = k1 (1 rt ) dt + 1 dz1t dl t = k 2 ( 2 l t )dt + 2 dz 2t

drt = k l ( t (rt l t ))dt + l dz lt

53. asset liquidity risk funding liquidity risk( cash

flow liquidity risk)Bid ask spread

1tightness
2depth 3resiliency

54. 1
2 3 4
5 6
7
Claim holdler
55. debt overhang
accrue to debt holder

56. G30 24


trading back office
CRMPG LTCM

57. VAR VAR

LFHS Gaming VaR VaR

58. VaR VaR = ( E[ V ] V )

*

9
 E[V ] = X 1 r1 + X 2 r2 + DPV DP

V = X 12 12 + X 22 22 + 2 X 1 X 2 1, 2 1 2 percentage

VaR = ( E[rp ] * rp ) ,- E[rp ] = 1 r1 + 2 r2 + DP ,

rp = 12 12 + 22 22 + 21 2 1, 2 1 2 ,

VaR = ( E[ rp rB ] r ) E[rp rB ] = 1 r1 + 2 r2 + DP (rB + DB )

*
p rB

rp = (1 1) 2 B2 + 22 22 + 2(1 1) 2 1, 2 1 2

59. VaR = 12 12 + 22 22 + 21 2 1, 2 1 2
VaR
60. VaR delta-normal
61. zero-out
,Anticipatory stress
scenario approach
zero-out Anticipatory stress scenario
approach Predictive anticipatory stress scenario approach
Anticipatory
stress scenario with stress correlation
VaR
delta-normal
62. POTpeak over threshold, block maximaPOT
block maxima GEV), GEV
EVT primarily univariate nature
63. Gaming VaR dramatic change in market
structure
64. Gaming VaR


65. coherent risk measure VaR
monotonicity
, translation invariance risk
free condition , homogeneity
subadditivity
Homogeneity subadditivity
SPAN( VaR
16
expected shortfall,

66. tax loss carryback carryforward

10


67. 32 97-6 9706

97.6 97 6/32
68. zero curve zero coupon YTM
trade rich

69. DV01 ,DV01= YTM0 - YTM1

DV 01
PPC= ,PPC
YTM 0

BV y BV+ y
percentage price change= BV
2 * BV0 * y
/

BV y + BV+ y 2 BV0
= 7
BV0 * y 2
50
P
= Dmod (r ) + 1 / 2 cov ex * (r ) 2 = 7 * 0.1% + 25 * (0.1%) 2 = 0.698%
P
70. 12
3
4

1
71. DV01=0.01%* * (
1+ y / 2

1
Dmod =1 / P* * (
1+ y / 2
y/2 =1+y/2*

PPC= Dmod *

72. perpetuity
zero coupon bond()deep discount bondpar bond premium bond
DV01
premium bond, par bond, deep discount bond zero coupon bond

11

73. barbell strategy Bullet
strategy Barbell

74. key rate bucket rate


implied forward rate

2 key rate 4.78 100 0.67
4.78=0.67/100*F F
75. on the run





76. B-S 1
02B-S
3


77. STRIPS(separate trading of registered interest and
principal securities) P-STRIPS,
C-STRIPSSTRIPS

STRIPS C-STRIPS
trade rich C-STRIPS trade cheap. P-STRIPS fair value

78. coupon rate YTM YTM
reinvestment risk , YTM
zero coupon

79. EAY EAR
80. 100M
1.7 101 50M 5 4.1 99
100 *101 *1.7 50 * 99 * 4.1
= = 0.61
100 *101 50 * 99

81. callable zero coupon callable zero coupon
call

82. MBS Mortgage ratecontract rate
Conventional mortgage fixed-rate,

12
 level-payment() ,full amortized mortgage

Prepayment
curtailment
MBS
mortgage pass-through securities ,CMO, stripped MBS MBS

mortgage age PAS
YTM 1 ytm2
/YTM /YTM implied model,

YTM,
prepayment function
model,
prevail
mortgage rate mortgage age point pay
- amout outstanding (+).
83. conditional prepayment rate ,CPR(single

monthly mortgage) (1 SMM ) = (1 CPR)

12

84. mortgage pass-through()

MBS
contract risk MBS
1
00

85. CMOCollator mortgage obligation mortgage pass-through
mortgage pass-through
CMO PAC(planned amortization class) initial
PAC collar initial PAC bond support tranch
support tranch PAC PAC
support tranch
86. CMO

dP / P = D * dy

87.

MBS00
88. (98 )
89. IO PO stripped MBS
mortgage rate IO PO PASSTHROUGH
IO PO mortgage pass-through
mortgage pass-through PO
90. MBS 5 1 2

13
 2 mbs 4
OASOASstatic spread5
OAS
91. delta-normal

libor FRN
FRN reset day
DELTA

FRN

92. S&P BBB Baa,BBS&P Ba

BBB BB
A1=A+,A2=A,A3=A-.

93. AAA AA BBB
BB AAA 0.3%BBB
1% B
CCC

94.
3c character ,capacity , capital

KMV

95.

B-S

S t = Vt N (d1 ) Ke rT N (d 2 ) Bt = Vt N (d1 ) + Ke rT N (d 2 )

V
ln( t +r + 2 / 2)T
d1 = K
V K
T
d 2 = d1 T
S B

N ( d 2 ) 1- N ( d 2 )

EDF()

14
96. KMV EDF d 1

E (Vt ) DPT
DD= , E (Vt ) DPT
E (Vt ) *
KMV
EBITDA

PD 02FRM
conceptual model

KMV

97. Altman =domestic nonconvertible high

yield default/market value of outstanding high yield bond
=/

1Altman 2Altman
3Altman call
subgrade Altman 4Altman
1971-1996 1981-1996 1970-1996
02
98. (MMR)= t /t

= 1 SRt = 1 SRT SRt=1-MMR(t) t SRT T

12
realized return

99. Altman rating migration
11970-1979 1981-1995 23rating
withdraw category
100.

101.1 2 3*
4
102. 1 2 3
4 5 67

103.=*
104. mean loss rate=PD(1-Recovery rate)Risk neutral mean loss rate=1-
/
105.

15


106.marginal cost pricing

107.cost-plus-profit
covenants()

108.RAROCrisk adjust return on capital
RAROC factor=2.33**sqrt(52)*(1-tax),
(RC) RAPM=
/RC. RAROC EVA

- * k
=-k* RAROC= ,

109. RAROC=()/ RAROC

R
L = DL L
1 + R
110.altman EAR=YTM-EAL

RP
R p = x i * EARi sharp ratio=
P
.

111.Z-score=6.56(X1)+3.62(X2)+6.72(X3)+1.05(X4)+3.25X1=/X2=
/ X3=EBIT/X4=/Z-score

N N
112. UALP = X
i =1 j =1
i X j i j
ij

113.
cost-plus-profit
=E(V)-P(C), Pc
RAROC

114.





CD
115.

16
 (ECE) x (WCE)

ECE= / 2 ,WCE=1.645 .AECE

AECE= 1 / T ECE t dt
0

AWCE= (1 / T ) WCE t dt
0

amortization effect, 0


1/4
3/2
1/3 T

116.(credit trigger)

time put

Creditmetrics

117.Creditmetric 1 2
3 4
P VaR.
02
118. VaR

119.Altman EAR=YTM-EAL.
120.Creditmetric
Creditmetric 1 VaR 2 VaR

121. 1=/a b
CreditMetric

122.Creditmetric

7
Creditmetris

Creditmetric
CreditPortfolioView

17
123.Creditmetric VaR 1 2
2 4
5 6
VaR

124. VaR = D P 1.64485 ( y ) P

*

(y ) = yield yieldvolatility / 250 VaR

125.

126.Derivative product company(DPC)

mirror trade

127.
1CDSCDS
Payment in a
credit swap is contingent upon a future credit event. Payment in a total rate
of return swap is not contingent upon a future credit event


2frist-to-default put
payoff par book value3
4
credit-link-note CLN
5max(0,-)*
*duration6

128.(CLN)
CLN

CLNCLNCLN
CLN
CLN
CLN
CLN

129.CLO CBO

tranch CLO CBO
CLO
CLO CBO

18
 repackaged bond
130.

131. replace contract
peak exposure ()
remainder of unmatched swap
*
C-VaR
VaR peak exposure short
C-VaR peak exposure02
132. OTC master netting arrangement
enforceability
02 special purpose derivative vehichles
spdv DPC
133.

134.: L f
m R b promise return rate

f + ( L + m)
1+ k = 1+ . k promised yield
1 [b(1 R)]
E(r)=p*(1+k),p
135.


136.linear discriminant Analysis model Altman z-score
1
2 3 4

137. t-bond corprate bond corporate debt
1+ i
1 p = 1
1+ k
1+ i
k i = = (1 + i )
+ p p

138. C P = 1 ( p1 * p 2 L p n )

139. RAROC1 /RAROC denominator

R R
L = D L * L * L D L
1+ R 1+ R
140. 1 2

19
 1 treasury rate f i corporate forward rate

1 + f1
ci p 2 =
1 + c1
141.
/
MPT

142.loan volume data
loan loss based model

X R = + X P ,

143.KMV Ri = AIS i E ( Li ) = AIS i EDF * LGD

i = ULi = Di * LGDi = [ EDF (1 EDF )]

1/ 2
* LGD

144.debt repudiation Debt

rescheduling repudiation
1
2 3
4

145.1 DSR=/2
IR/3 INVR=/GNP
4

VAREX=
2
ER ()5 MG/

146. CRAcountry risk analysis1 2

3 45
assessing incentive to reschedule()6

147. 1 2
1 2 3
1 2 3 1
2 3

148. 1debt-for-equity swap2multiyear restructuring
agreement3sales in secondary markets 4debt-for-equity swapbrady bond
149. segements1

20
 2HLT buyout(
)acquisition HLT distress
95% non-distress distress
150. 1 participation agreement 2
assignment 90% assignment participation
assignment
151. non distress HLT 1
2 3 4 5distress
HLT 1
2 3
152. 1 2 3
4
153.1 2

154. S T = Max(VT F ),0)

DT = F Max( F VT ,0) F VT

S t = Vt N (d1 ) Ke rT N (d 2 )

SVFTt ) = Vt N (d ) Ke rT N (d T t )

jump
155.

156.

F
U+FSD(V,F,T,t)=c(V,F,T,t)-c(V,U+F,T)

ln( F ) ln(V ) (T t ) + 0.5 2 (T t )

157. PD= N (
T t

u (T t ) ln( F ) ln(V ) (T t ) 0.5 2 (T t )

LGD=F*PD- Ve N(
T t
158.creditRisk+


K
pi ( x) = G (i ) ( x k wik ) . pi (x) G (i ) i G
k =1

wik k x

21
159.creditRisk+creditMetrics KMV

160.vulnerable option

Max[ Min(V , S K ),0] ,S K

vulnerable option (1 p )c + pzc

161.



162.1counterparty risk :OTC
2 3CE4PFE,5
EE 6EPE, 7
right way exposure,8wrong way exposure
9creditrisk mitigant()
liduidity put
credit trigger
early settlement and termination provision10

163. PFE
PFE
MC
164.OTC CVACVA
A 8 B 3 CVA=5,
A X-5
165.Mean loss rate=PD(1-) EE(
) L()
166. 1 EE2
L3 C4 V=EE*L*C
A B - A

167.1 2agency conflict

large
regional and super regional bank 10 25billion
U

X-inefficiency
168. daylight overdraft risk
FedWire SWIFT Fed reserve low intraday

22
 rates overdraft borrowing
negative ripple effects
169. HFLS LFHS,
top-down

Top-down HFLS LFHS
bottom-up , construct
HFLS LFHS , forward looking

170.top-down 1 2
income-based model 3
expense-based model 4
operating leverage model 5 scenario
ananlysis 6risk profile model
performance
residual variance.
171.buttom-up 1causal networks
2connectivity model causal
networks 3reliability model
4empirical loss
567
proprietary
172.
catastrophe option ()
catastrophe bonds cat bond,

173. limitation: 1complexity
2 34

174.metallgesellschaft

stack-and-roll
contango
175.yasuo Hamanaka

176.LTCM
CRMPG LTCM


177.
178.Hoffman 5 class1people riskemployee misled, employee
error, 2relationship risk client
customer
3technology risk4physical risk

23
 5external fraudregulatory changes
179.Hoffman 1origination
2 3managing business line
4corporate level activity

180.ITWGOR 6

6 restitution to other party()
asset write down
181.: the risk of direct and indirect loss resulting from
inadequate or failed internal process, people and system or from external event
reputation risk strategic risk ++
02

182.risk assessment strategy1 2

3
183. quadrant top-down bottom-up
qualitative quantitativebottom-up
control self-assessment,CSA collaborative risk assessments.
top-down
LTCM
CSA
CSA
1 2 3 4 5follow-up
risk assessment interview delphi-type scenario
()

184. type risk class breadth of application

185.1inherent-risk indicator:
staff tenure 2management-control indicator:
3composite indicator
1 2 4
186. 1predictiveprospective2
accessible and timely
187. backtesting

188.1 2
3

24
COOR

189.COORcost of operational risk1 2

3 4
COOR=1+2+3-4
190.COOR 1 21
2

191.1
= required earnings/ CAPM
1
23 2loss
scenario model,LSM
LSM issue-based model risk mappingissue-based model
issue risk mapping

LSM 1 2
3 4
LSM 1 2
3 trend analysis,
4
56

Delta-EVT

bayesian belief networks
system dynamics approach
neutral networks

buttom

192.
generalized


193.1COOR
2 risk-aware 3
4 5

25

194.top-down
chanrge
bottom-up

195.bankers turst RAROC.1
2 3

196. RAROC 1 2
3
197.Scorecard capital allocation top-down
:1 2
overlay3
198.zero sum game top-down

199.

(
(WCL)-Estimated lossEL)* RAROC
revenues-expected loss-expenses+return on economics capital+(-)transfer
price/
200. RAROC charge

F1 (VAR) + F2 [ MAX (VAR lim it VAR,0)] + F3 [ MAX (VAR VAR lim it ,0)]

F VAR 99
VAR Limit 100000F1 2F2 0.2,F3 4 VAR 80000
RAROC charge2800000.21000008000040164000 VAR
150000 RAROC charge21500000.204150000100000500000
201. chargecapitalmarket value of position capital factor
(tenor)
202.RAROC RAROC

ARAROC ( RAROC R F ) / E , ARAROC>

203.


originator Originator 1
readily accessible cash2
3 4

26
 5 6
7 ABS
204.ABS originator individual asset structure of
transaction
205.intermediaries
ABS1origator SPE2SPE
ture sale originator
creditor
3SPE ABS ABS
Subordinated tranches senior tranches
ABS
excess spread over collateralization ABS
risk profile adversely affected
debtholder
originator
206.1 2
3 4

207.
1
2 3 4

208. tier1tier2 tier3
after-tax retained earning,


100

209. 100past due 150

210.IRB
PD LGD,EAD(Exposure at defalut)
M
211. loan loss
provison insterst margins
LGD
downturn LGD
212.mitigation


1 2receivable3guarantee and credit derivatives
LGD

27
213.basel 2 1external
rating-based approach(RBA,RBA originator
investor ),supervisory formulaSF,
,internal assessment approachIAA,

214. 20 10 10 1
250 5000 exception 099
1.0,100-199 1.13 1.28 1.33Kupiec

LRuc = 2 ln[(1 p ) T N p N ] + 2 ln{[1 ( N / T )]T N ( N / T ) N } N

T p 1-4
35 8 3.4 3.85 10
4
215.BASEL VAR 99% 10
RiskMetrics 95% 1
216.1basic indicator approach(BIA),/
152TSA
3advanced measurement
approach(AMA),

P( A I B)
217. P( A U B) = P ( A) + P( B) P( A I B) , P ( A / B ) = ,
P( B)

P( Bi ) P( A / Bi ) P( Bi ) P( A / Bi )
P ( Bi / A) = =
P( B1 ) P( A / B1 ) + P( B2 ) P( A / B2 ) + L + P( Bk ) P( A / Bk ) P( A)

n! n!
Pn = , C nr =
r

(n r )! r!(n r )!

218. var( X ) = E (( X E ( X )) = E ( X ) E ( X ), var(cX ) = c var( X ), var( X Y ) = var( X ) + var( X ),

2 2 2 2

cov(X,Y)=E(XY)-E(X)E(Y) XY cov
X,Y
=0,var(X+Y)=var(X)+var(Y)+2cov(X,Y)

cov(ax + by, cx + dy ) = acVar ( x) + bdVar ( y ) + (ad + bc) cov( x, y )

1
chebyshev k 1
k2
219.mode median

28
 even
220.skewnessoutlier
mode median
mean>median>modemode>median>mean
Leptokurtic platykurtic

(X i X )3
SK = s
ns 3

(X i X )4
excesskurtusis = = 3
ns 4

221. f ( x) = 1 /( a b), fora x b, elsef ( x) = 0

E(x)=(a+b)/2,var(x)=(b-a)^2/12
np, npq.500.67 68
x
951.96 992.58 Z z

x e
P ( X = x) = np
x!

X np
z = n
npq

222. X E ( X ) = ,

2
=
2
x
n

pq
proportions p =
n

x x = 12 / n1 + 22 / n2
1 2

( X i ) 2
Xi
2

s2 =
(X i X) 2

= n
n 1 n 1

(n 1) s 2 (X1 X )2 + L + ( X n X )2
Chi-square 2 = =
2 2
Chi-square

29

223.point estimate1
unbiased estimator 2
3
consistent
224.F Chi-square

225. Yi = b0 + b1 xi + i b0 intercept b1 slope

coefficientY dependent,X independent

(SEE, Standard error of the estimate)
n

SSE (Y Y ) i i
2

SEE = se = = i =1
=
2 i
,SEE the better the fit
n2 n2 n2
SSE sum of the squared error SSE
OLS ordinary least square

b1 =
cov( X , Y )
=
(Y Y )( X X= n X Y X Y
i i i i i i
intercept
var( X ) (X X ) i n X ( X ) 2
i
2
i
2

b0 = Y b1 X
2
226.R YX
2
R =0.63 63%R

sum of the squared total variation SST = (Y i Y )2

n
SSE= (Y Y )
i =1
i i
2
,sum of squared regression

SSR = (Yi Y ) 2 R 2 =
SSR
= 1
SSE
=
(Y Y )
i
2

SST SST (Y Y )
i
2

SSE+SSR=SST

b1 b1
227.tb1 t b =
sb
1

0.78 0.32 26 5%

b1 b1
b1 0 t b = =0.78 0) / 0.32 = 2.4375 24 t
sb
1

2.064
n
( X i X )(Yi Y )
228. cov =
i =1 n 1

30
 r n2
t t =
1 r2

229.EWMA n = n 1 + (1 )u n 1 n 1
2 2 2

GRACH(1,1)

n2 = + n21 + un 12 = VL V L =
1

+ + = 1, + < 1

230. NOTE GRACH GRACH(1,1)

= ht = 0 + 1 rt 1 + ht 1 1 + < 1, 1 +
2

1
231.MA MA(30) 30 t =
2

M
r 2
t i

232.

233.tracking error volatility best

hedge
Implied view
return-to
risk ratio (=position weight *(/))
return-to risk ratio

234. VaR homogeneous euler decompose

( w) ( w) ( w)
w) = w1 + w2 + L + wN
w1 w2 w N

VaR( w) VaR( w) VaR( w)

VaRw) = w1 + w2 + L + wN
w1 w2 wN

VaR( w) ( w) ( w)
235. w1 w1
w1 w1 w1

*
wi wi

( w) ( w* wi )
change in risk: wi i ,*
wi wi

31


implied view expected return

236. pension fund strategic benchmark is a hedge against the
liability stream. pension fund
237.
analysis of strategic benchmark,1
2

global capitalization weighted portfolio 1
2
1
2 3
implied view
238.strategic benchmark risk decomposition

239.total fund tracking error


240.
241.

Marginal contribution to total fund expected outperformance(alpha)

marginal contribution to total fund tracking error
port the alpha of onto

242.black-litterman
black-litterman

243. outperformance


244.global tactical asset allocation 1
2
245. VaR VaR 1VaR
2VaR

246. VaR 1VaR 2
VaR 3VaR
247. defined benefit plan
plan sponsors benefit

pension payment defined contribution plan

32
 trustee employee
defined contribution plan 1 2rogue manager
,
defined contribution plan
plan defined benefit plan 1surplus
risk 2tracking
error risk 1fee
income2customer satisfaction VAR

248. 1 2
3 4
plan pension liability
strategic asset allocation surplus at risk ()
tactical asset allocation implementation risk
tactical asset allocation risk, asset held by the plan
active risk (plan level)(
) , asset held by a given manager active
risk(manager level)
249. thresholds
outperformance
250. 1downstreaming()
SAR(surplus at risk)
2 dynamic trigger():


251. maintaining a quality VAR measure1
consistency 2 3
252. risk threshold 1
elevate the information2
3
SAR
implementation risk active risk (plan
level)1 2 threshold3
institute a overlay program active risk(manager level)
253. 1 2 3 45(
)
254.


outperformance market1
2
6 1 2 3
deficiencies in the benchmark4 5 6
255.12

33
 3realized 4
realized
256.1 2
1
2

257. 3-zone approach:
,

258.Ontario teacherspension plan VAR
80 14 surplus 1
VAR 1 2 3
/ 4 5
259. SAR,SAR 1policy SAR
2MEAR,
policy asset benchmark
260.



fundamental factor model
261.explicit factor model,
implicit factor model PCA
explicit model:
implicit factor model

262.fund of hedge funds

1
2 3
4 5
6 7
8 FOHF 1

263. 1return enhancer
2risk reducer 3total diversifier
4pure diversifier

264.fund of hedge fund fund of hedge fund
1 2


265.1
2business model3

34
266.IRC
1 2 3
strategy driftIRC 1content2granularity
3frequecy4delay
267. style drift 1
2
3

268.
1 2
bottom up topdown1
2

12 3 4
5 6
269.1monitoring risk factor
2return-based analysis3performance
attribution4peer group comparison
5position analysis6communication with the fund manager
270.PWG

Hedge fund manager risk broker

decideassignchoose
monitor approve
271.1
joint decision 23
45
67
7
272. 1 generally
accepted accounting practices(GAAP),2 adjustment based
upon risk3NAV GAAP

273.interrelatedmarket riskfunding risk
counterparty risk
replacement costpotential future exposurePD amount of documentation
274. accounting based
risk-based
volatility-of-value-to-equity,
dynamic measure

275.data-entry error system failureerror in valuation
fraudrandom spot check of activity

35
 separation of dutymaintenance of a centralization data
set internal review

36