November 15, 2012
Dear FRM Candidate,
Just a few days to to go! Hope you are making the best out of your study time by revising and solving plenty of practice questions.
Last week, we took a look at several trading strategies. I hope it helped cement your concepts. This time, we will look at more excel sheets on Financial Markets and Products and Valuation and Risk Models.
Financial Markets and Products:
1. Cheapest to Deliver – You can learn how to identify the cheapest to deliver in a T.Bond contract
2. Duration Hedging – Understand how to calculate the number of T.Bond contracts needed to hedge a bond portfolio.
3. Forex Futures Arbitrage – Discover arbitrage situations when interest rate parity does not hold.
4. Interest Rate Swap – Check out the mechanics of a plain vanilla interest rate swap
Valuation and Risk Models:
1. Option Pricing – Find the value of an option by both Black Scholes and Monte Carlo Simulation
2. VaR – Find the Historical VaR, Parametric VaR, EWMA Volatility, Margin Requirement based on VaR, and forecast the stock price using Geometric Brownian Motion.
I hope these models help you attain a deeper understanding of these topics.
Wishing you luck for your exams!