Can someone explain how he equated 1-U1=U2? I didn't get this step ?
@finRGBКүн бұрын
From U1, we create another random variable U2 = 1 - U1. U2 is intuitively an antithesis of U1 (when U1 is high, U2 is low and vice versa).
@olamoyegunoreofe3 күн бұрын
Thanks for the explanation
@pocrakaa5 күн бұрын
Thank you man!
@johnmurphy26127 күн бұрын
Excellent presentation.
@mayssamahmoud35068 күн бұрын
Thank you for the explanation ! I don’t understand the interest rate parity formula you introduce at the min 11:51, isn’t it suppose to be Fwd/Spot = (1+rEUR)/(1+rUSD) since USD is the domestic and EUR is the base (foreign) ?
@finRGB8 күн бұрын
Since our exchange rate quote is expressed as USD per unit of EUR, in the interest rate parity formula, (1 + r(USD)) goes in the numerator and (1 + r(EUR)) goes in the denominator.
@mayssamahmoud35068 күн бұрын
@@finRGB can you please give more explanation about it please ? In terms of foreign and domestic too ? Thank you !
@mayssamahmoud35068 күн бұрын
The given formula on internet is: Ff/d = Sf/d * ((1+rf)/(1+rd)). f: foreign and d: domestic Is it the correct one ?
@finRGB8 күн бұрын
@@mayssamahmoud3506 Sure, this video on the channel will help you with the formula and interpretation of the IRP: kzbin.info/www/bejne/r3W3e4Wih7d-d6s
@whathuh696515 күн бұрын
Are you even fvcking serious? You literally complicated the hell out of how a swap functions. SHOW REAL EXAMPLES! what is this t0 t1 bullsh|t. Just show actual currency rates and an example in real currency. I cannot stand when people overcomplicate simple sh|t.
@khushipitaria82415 күн бұрын
Best!
@khyatipatel228518 күн бұрын
Probably a stupid q, but what is the difference between c/s and C/s volatility risk?
@reilk267322 күн бұрын
Superb explanation
@varunmishra950722 күн бұрын
Crisp, clear and to the point. All the thanks sir
@finRGB21 күн бұрын
Glad you found the video useful, Varun.
@ghairathayat483523 күн бұрын
Brilliantly explained
@finRGB23 күн бұрын
Thank you for the appreciation, Ghairat.
@WeiHanCheng23 күн бұрын
Thanks for the video! so essentially the financing costs for the euros is 0.5%, with the swap. is there a significance or costs savings compared to just borrowing from the euro market in real life so it justify the swap?
@ezeee59527 күн бұрын
Could you please explain how the 5bps ended up as 0.0005? Should it not be 0.05%? Am I missing something glaringly obvious?
@SyedMohommadKumailAkbar27 күн бұрын
Excellent video, made the concepts crystal clear. thank you for this
@finRGB27 күн бұрын
Glad you found the video helpful, Syed.
@Ghostfreak_NBАй бұрын
Very helpful. Can you also help wrt MCLR and IRS /SLS
@Ghostfreak_NBАй бұрын
Extremely helpful
@zwothethothori6058Ай бұрын
Amazing lesson. ❤❤
@DreamedZindagiofAryanАй бұрын
You are doing Veri good brother .Huge efforts 💫💫. Plz go ahead and put more videos for FRM course
@jjrossphdАй бұрын
Excellent presentation
@finRGBАй бұрын
Thank you, John.
@anusaysannyeong2561Ай бұрын
I have been struggling with this topic for too long. thank you.
@mamta05082 ай бұрын
Could you pls help explain that does VaR provide a maximum or a minimum value we can lose for a given confidence level ? Or does it depends on the type of distribution i.e profit distribution or loss distribution? please help clarifying this as I'm little confused. thanks
@finRGB2 ай бұрын
Hello @mamta0508. Focusing exclusively on the loss distribution, the use of "maximum" vs "minimum" is respectively linked to the whether you use "level of confidence" vs "level of significance" to express your VaR. If your 95% confidence VaR is 10 mn, you will be 95% confident that your actual loss (or negated profit) will not exceed 10 million (i.e. a maximum level). Alongside, you can say that 5% of the time, your loss will turn out to be more than 10 million (i.e. a minimum level).
@mamta0508Ай бұрын
@@finRGB thank you very much for clearing this doubt!
@stevenrix702410 күн бұрын
@@mamta0508Just to be clear, 95% VaR = 10mn gives just one number. 95% of the time (e.g. 19 times out of 20) the Clean P&L (essentially excluding factors not in Var, e.g. income from new deals and time effects) should be either a profit (of any size) or a loss in the range 0-10mn. It doesn’t say how bad the loss might be, in the 5% of the time that VaR is exceeded! With HistSim VaR, you can monitor the tails to some extent by logging VaR at other confidence intervals, e.g. 97.5% and 99%. If the distribution is normal then the ratio of 99% VaR / 97.5% VaR should be about 1.18, so if you observe a bigger ratio than that then you might have “fat tails”.
@QUANT.3692 ай бұрын
my lack of knowledge i was unable to understand what you saying
@finRGB2 ай бұрын
If you'd like to understand CVA, you can watch these (more introductory) videos on the channel before accessing this video: 1) Exposure metrics: kzbin.info/www/bejne/Zom7n6SfndR2j5Y 2) Valuation Adjustments: kzbin.info/www/bejne/bZ6ao4t4h82kl5Y 3) CVA for a Bond: kzbin.info/www/bejne/rHylh2qPeLacZ7s
@anubhavpratik27672 ай бұрын
very nicely explained
@anubhavpratik27672 ай бұрын
Question: Could you please let me know is economic capital is always greater than regulatory capital in all scenarios ?
@MartinaHo-vu9de2 ай бұрын
May I know for calculating the fair value of swap, why we use 0.64current exchange rate, but not the projected forward rate?
@finRGB2 ай бұрын
There are two ways you can do this valuation: Method 1 is to find the present value of the respective cash flows in the two currencies separately. Then, you convert the PV of the cash flows in the 'other' currency to the currency in which value is being calculated by using the current exchange rate. This is because the PV of cash flows is as of today. Method 2 is to find the net cash flow on each settlement date using the forward exchange rate as of that date and then discount all netted cash flows to today. Both methods give the same final answer.
@622948382 ай бұрын
what is a ZCV?
@finRGB2 ай бұрын
ZCB: Zero Coupon Bond
@FarhanKhan-dr9xt2 ай бұрын
amazing explanation
@CP_cpd2 ай бұрын
if we condition on F, where F = 0 , why do we not get back to PD(i)?
@finRGB2 ай бұрын
PD is the unconditional probability of default. You'll get it if you calculate the expectation (i.e. probability weighted average) of conditional probability of default (conditional on various chosen values of F).
@alanPinto-fo8sp2 ай бұрын
@finRGB , So the notional value won't change as the FX rates are locked in at the beginning and since EUR/USD has their own interest rate (Interest rate parity). Won't it have two risk: 1) Interest rate fluctuation risk 2) FX currency risk (where proceeds are received in quote currency and to covert the the same in base currency?
@jaquelinemoreira73852 ай бұрын
Amazing explanation! thank you so much, it was really helpful
@finRGB2 ай бұрын
Glad that the video was helpful, Jaqueline.
@tsreddy0092 ай бұрын
Isn't the left tail is for the loss distribution and right tail for the profit distribution?
@fabiosanti71533 ай бұрын
Extremely clear, as usual ... which is key for a video on such a technical topic.
@fabiosanti71533 ай бұрын
Very clear indeed! Thanks!
@finRGB3 ай бұрын
Glad you found the video helpful, Fabio.
@ranggadwijaka2653 ай бұрын
If we use 3 year historical data, will it predict loss for the next 3 years?
@Tyokok3 ай бұрын
Thanks a lot for the best explain and derivation of the BM! May I ask where is the 2nd part of this topic? That how you convert back from discrete to continuous. Really appreciate it!
@SuperAbhishek3333 ай бұрын
Thanks Sir, Simplest explanation😃
@sujoyghosh24203 ай бұрын
Sir an example would be really helpful to grasp the concept better..
@finRGB3 ай бұрын
The aim was to present the concept in its most general sense (without resorting to any approach or technique to calculate Credit VaR). Will surely add a solved example in a video on CreditMetrics / Vasicek models.
@haythemtilouch11913 ай бұрын
Great video as usual ! Thank you so much for clarifying this concept.
@faisaljamal61983 ай бұрын
Hey I'm extremely weak in Quants, what should I learn before I take the FRM ? Im planning to write it next year in 2025.
indians are everywhere now. I started from programming tutorials and now i watch a finance tutorial and look at this :O
@anindadatta1644 ай бұрын
very well explained
@haythemtilouch11914 ай бұрын
Great video as always ! I just have a quick question, what's the difference between the usual VaR and Credit VaR ?
@finRGB4 ай бұрын
Thank you for the appreciation, Haythem. Will do a short video on Credit VaR.
@haythemtilouch11914 ай бұрын
@@finRGB Thank you so much, can't wait to see it !
@tapio_m68614 ай бұрын
Expected Shortfall fixes some of the disadvantages that VaR has. VaR says how much loss can be expected at a certain likelihood. E.S. tells you more about the shape of the bell curve and what happens beyond the VaR level.
@saurabhsahu78604 ай бұрын
Great insight.
@Invest-qh3jh4 ай бұрын
Wow
@tommy9x4 ай бұрын
Does this include Machine learning?
@finRGB4 ай бұрын
You can find the updated version of the study plan here: www.finRGB.com/frm-part-1-study-plan (includes the machine learning readings).
@gireeshkodali12315 ай бұрын
Very helpful video. Thank you. On the Volatility smile graph (for bullish markets), I guess the video does not explain on why the In-the-money calls have an Implied Vol (IV) that is so much higher than the At-the-money calls. Would you be able to explain briefly, please?
@puneetgupta91162 ай бұрын
If market have the sentiment that stock will go down in futre, investors will sell ITM calls to earn much elevated premium and hence demand of such ITM calls increases.
@mohanbandaru065 ай бұрын
Thanks a lot sir..... :)
@haythemtilouch11915 ай бұрын
Question: What is the diffrence between the calculation the economic capital and the IRB Risk weight function ? and btw your one of the best teacher i've encontered in youtube thank so much for your videos !
@finRGB5 ай бұрын
A firm calculates economic capital to size up its buffers meant to absorb losses owing to various risk types (market, operational, credit etc.). It's an internal calculation aimed to have enough capital to limit the probability of financial distress (this probability can be picked based on the firm's target credit rating). Internal Ratings Based (IRB) approach is meant to calculate RWA that are specific to credit risk. It comes as part of Basel II / Basel III, for calculation of regulatory capital.