【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 2017 SchweserNotes™ Pari I Valuation and Risk Models eBook ® I ( A P L A N \ UN IVERSITY ) SCHOOL OF PROFESSIONAL AND CONTINUING EDUCATION SCHWESER 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 【梦轩考资网www.mxkaozi.com】 QQ106454842 Getting Started 专业提供CFA FRM全程高清视频+讲义 Part I FRM® Exam The Kaplan Way for Learning Welcome As the Vice President of Product Management at Kaplan Schweser, I am pleased to have the opportunity to help you prepare for the 2017 FRM® Exam Getting an early start on your study program is important for you to sufficiently Prepare ►Practice ► Perform® on exam day Proper planning will allow you to set aside enough time to master the Acquire new knowledge learning objectives in the Part I curriculum through demonstration and examples Now that you’ve received your SchweserNotes™, here’s how to get started: Step 1: Access Your Online Tools Visit www.schweser.com/frm and log in to your online account using the button located in the top navigation bar After logging in, select the appropriate part and proceed to the dashboard where you can access your online products A PRACTICE Step 2: Create a Study Plan Create a study plan with the Schweser Study Calendar (located on the Schweser dashboard) Then view the Candidate Resource Library on-demand videos for an introduction to core concepts Apply new knowledge through simulation and practice Step 3: Prepare and Practice Read your SchweserNotes™ Our clear, concise study notes will help you prepare forthe exam At the end of each reading, you can answer the Concept Checker questions for better understanding of the curriculum Attend a Weekly Class Attend our Live Online Weekly Class or review the on-demand archives as often as you like Our expert faculty will guide you through the FRM curriculum with a structured approach to help you prepare forthe exam (See our instruction packages to the right Visit www.schweser.com/frm to order.) 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Sincerely, May Exam Instructor Dr John Broussard CFA, FRM Derek Burkett, CFA, FRM, CAIA ‘ Dates, times, and instructors subject to change November Exam Instructor Dr Greg Filbeck CFA, FRM, CAIA VP, Product Management, Kaplan Schweser Contact us for questions about your study package, upgrading your package, purchasing additional study materials, or for additional information: www.schweser.com/frm | Toll-Free: 888.325.5072 | International: +1 608.779.8397 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 FRM Pa r t I Bo o k 4: Va l u a t io n Re a d in g Va l u a t io n a n d a nd A s s ig n m e n t s and Ris k M o d e l Ri s k M o d e l Le a r n in g O b je c t s iv e s s VaR Methods 52: Quantifying Volatility in VaR Models 12 53: Putting VaR to Work 34 54: Measures of Financial Risk 48 55: Binomial Trees 60 56: The Black-Scholes-Merton Model 77 57: Greek Letters 95 58: Prices, Discount Factors, and Arbitrage 115 59: Spot, Forward, and Par Rates 131 60: Returns, Spreads, and Yields 149 61: One-Factor Risk Metrics and Hedges 165 62: Multi-Factor Risk Metrics and Hedges 182 63: Country Risk: Determinants, Measures and Implications 195 64: External and Internal Ratings 214 65: Capital Structure in Banks 224 66: Operational Risk 236 67: Governance Over Stress Testing 249 68: Stress Testing and Other Risk Management Tools 260 69: Principles for Sound Stress Testing Practices and Supervision 266 Se l f -Te s t : Va l u a t io n Fo r v and Ri s k M o d e l s 279 286 mu l a s Ap p e n d i x 291 In d e x 294 © 2017 Kaplan, Inc Page iii 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 FRM 2017 PART I BO O K 4: VALUATION A N D RISK M ODELS © 2017 Kaplan, Inc., d.b.a Kaplan Schweser All rights reserved Printed in the United States o f America ISBN: 978-1-4754-5314-0 Required Disclaimer: GARP® does n o t endorse, prom ote, review, or w arrant the accuracy o f the products or services offered by Kaplan Schweser o f FRM® related inform ation, nor does it endorse any pass rates claimed by the provider Further, GARP® is n o t responsible for any fees or costs paid by the user to Kaplan Schweser, nor is GARP® responsible for any fees or costs o f any person or entity providing any services to Kaplan Schweser FRM®, GARP®, and Global Association o f Risk Professionals™ are tradem arks owned by the Global Association o f Risk Professionals, Inc These materials may not be copied w ithout written permission from the author The unauthorized duplication o f these notes is a violation of global copyright laws Your assistance in pursuing potential violators of this law is greatly appreciated Disclaimer: The SchweserNotes should be used in conjunction with the original readings as set forth by GARP® T he information contained in these books is based on the original readings and is believed to be accurate However, their accuracy cannot be guaranteed nor is any warranty conveyed as to your ultimate exam success Page iv © 2017 Kaplan, Inc 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 Re a d i n g A s s i g n m e n t s Le a r n i n g O b j e c t i v e s and The following material is a review o f the Valuation and Risk Models principles designed to address the learning objectives setforth by the Global Association o f Risk Professionals Re a d in g A s s ig n m e n t s Linda Allen, Jacob Boudoukh, and Anthony Saunders, Understanding Market, Credit and Operational Risk: The Value at Risk Approach (New York: Wiley-Blackwell, 2004) 52 “Quantifying Volatility in VaR Models,” Chapter (page 12) 53 “Putting VaR to Work,” Chapter (page 34) Kevin Dowd, Measuring Market Risk, 2nd Edition (West Sussex, England: John Wiley & Sons, 2005) 54 “Measures of Financial Risk,” Chapter (page 48) John Hull, Options, Futures, and Other Derivatives, 9th Edition (New York: Pearson, 2014) 55 “Binomial Trees,” Chapter 13 (page 60) 56 “The Black-Scholes-Merton Model,” Chapter 15 (page 27) 57 “Greek Letters,” Chapter 19 (page 95) Bruce Tuckman, Fixed Income Securities, 3rd Edition (Hoboken, NJ: John Wiley & Sons, 2011 ) 58 “Prices, Discount Factors, and Arbitrage,” Chapter (page 115) 59 “Spot, Forward, and Par Rates,” Chapter (page 131) 60 “Returns, Spreads, and Yields,” Chapter (page 149) 61 “One-Factor Risk Metrics and Hedges,” Chapter (page 165) 62 “Multi-Factor Risk Metrics and Hedges,” Chapter (page 182) 63 Aswath Damodaran, “Country Risk: Determinants, Measures and Implications - The 2015 Edition” (July 2015) (page 195) Arnaud de Servigny and Olivier Renault, Measuring and Managing Credit Risk (New York: McGraw-Hill, 2004) 64 “External and Internal Ratings,” Chapter © 2017 Kaplan, Inc (page 214) 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 Book Reading Assignments and Learning Objectives Gerhard Schroeck, Risk Management and Value Creation in Financial Institutions (New York: John Wiley & Sons, 2002) 65 “Capital Structure in Banks,” Chapter (page 224) John Hull, Risk Management and Financial Institutions, 4th Edition (Hoboken, NJ: John Wiley & Sons, 2015) 66 “Operational Risk,” Chapter 23 (page 236) Akhtar Siddique and Iftekhar Hasan, eds Stress Testing: Approaches, Methods, and Applications (London: Risk Books, 2013) 67 “Governance Over Stress Testing,” Chapter (page 249) 68 “Stress Testing and Other Risk Management Tools,” Chapter (page 260) 69 “Principles for Sound Stress Testing Practices and Supervision” (Basel Committee on Banking Supervision Publication, May 2009) (page 266) Page vi © 2017 Kaplan, Inc 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 Book Reading Assignments and Learning Objectives Le a r n in g O b je c t iv e s 52 Quantifying Volatility in VaR Models After completing this reading, you should be able to: Explain how asset return distributions tend to deviate from the normal distribution, (page 12) Explain reasons for fat tails in a return distribution and describe their implications, (page 12) Distinguish between conditional and unconditional distributions, (page 12) Describe the implications of regime switching on quantifying volatility, (page 14) Explain the various approaches for estimating VaR (page 15) Compare and contrast different parametric and non-parametric approaches for estimating conditional volatility, (page 15) Calculate conditional volatility using parametric and non-parametric approaches, (page 15) Explain the process of return aggregation in the context of volatility forecasting methods, (page 25) Evaluate implied volatility as a predictor of future volatility and its shortcomings, (page 25) 10 Explain long horizon volatility/VaR and the process of mean reversion according to an AR(1) model, (page 26) 11 Calculate conditional volatility with and without mean reversion, (page 26) 12 Describe the impact of mean reversion on long horizon conditional volatility estimation, (page 26) 53 Putting VaR to Work After completing this reading, you should be able to: Explain and give examples of linear and non-linear derivatives, (page 34) Describe and calculate VaR for linear derivatives, (page 36) Describe the delta-normal approach for calculating VaR for non-linear derivatives, (page 36) Describe the limitations of the delta-normal method, (page 36) Explain the full revaluation method for computing VaR (page 40) Compare delta-normal and full revaluation approaches for computing VaR (page 40) Explain structured Monte Carlo, stress testing, and scenario analysis methods for computing VaR, and identify strengths and weaknesses of each approach, (page 40) Describe the implications of correlation breakdown for scenario analysis, (page 40) Describe worst-case scenario (WCS) analysis and compare WCS to VaR (page 42) 54 Measures of Financial Risk After completing this reading, you should be able to: Describe the mean-variance framework and the efficient frontier, (page 48) Explain the limitations of the mean-variance framework with respect to assumptions about the return distributions, (page 50) Define the Value-at-Risk (VaR) measure of risk, describe assumptions about return distributions and holding period, and explain the limitations of VaR (page 51) Define the properties of a coherent risk measure and explain the meaning of each property, (page 52) Explain why VaR is not a coherent risk measure, (page 53) © 2017 Kaplan, Inc Page vii 【梦轩考资网www.mxkaozi.com】 QQ106454842 专业提供CFA FRM全程高清视频+讲义 Book Reading Assignments and Learning Objectives Explain and calculate expected shortfall (ES), and compare and contrast VaR and ES (page 53) Describe spectral risk measures, and explain how VaR and ES are special cases of spectral risk measures, (page 54) Describe how the results of scenario analysis can be interpreted as coherent risk measures, (page 54) 55 Binomial Trees After completing this reading, you should be able to: Calculate the value of an American and a European call or put option using a onestep and two-step binomial model, (page 60) Describe how volatility is captured in the binomial model, (page 67) Describe how the value calculated using a binomial model converges as time periods are added, (page 70) Explain how the binomial model can be altered to price options on: stocks with dividends, stock indices, currencies, and futures, (page 67) 56 The Black-Scholes-Merton Model After completing this reading, you should be able to: Explain the lognormal property of stock prices, the distribution of rates of return, and the calculation of expected return, (page 77) Compute the realized return and historical volatility of a stock, (page 77) Describe the assumptions underlying the Black-Scholes-Merton option pricing model, (page 80) Compute the value of a European option using the Black-Scholes-Merton model on a non-dividend-paying stock, (page 81) Compute the value of a warrant and identify the complications involving the valuation of warrants, (page 87) Define implied volatilities and describe how to compute implied volatilities from market prices of options using the Black-Scholes-Merton model, (page 88) Explain how dividends affect the decision to exercise early for American call and put options, (page 86) Compute the value of a European option using the Black-Scholes-Merton model on a dividend-paying stock, (page 83) 57 Greek Letters After completing this reading, you should be able to: Describe and assess the risks associated with naked and covered option positions (page 95) Explain how naked and covered option positions generate a stop loss trading strategy, (page 96) Describe delta hedging for an option, forward, and futures contracts, (page 96) Compute the delta of an option, (page 96) Describe the dynamic aspects of delta hedging and distinguish between dynamic hedging and hedge-and-forget strategy, (page 99) Define the delta of a portfolio, (page 102) Define and describe theta, gamma, vega, and rho for option positions, (page 103) Explain how to implement and maintain a delta-neutral and a gamma-neutral position, (page 103) Describe the relationship between delta, theta, gamma, and vega, (page 103) Page viii © 2017 Kaplan, Inc ... conditional and unconditional distributions, (page 12 ) Describe the implications of regime switching on quantifying volatility, (page 14 ) Explain the various approaches for estimating VaR (page 15 )... (page 10 3) Page viii © 2 017 Kaplan, Inc 【梦轩考资网www.mxkaozi.com】 QQ10 645 4 842 专业提供CFA FRM? ??程高清视频+讲义 Book Reading Assignments and Learning Objectives 10 Describe how hedging activities take place in... replicating portfolio using multiple fixed income securities to match the cash flows of a given fixed income security, (page 12 3) Identify arbitrage opportunities for fixed income securities with