Glad you found the video useful, Varun.

Thank you for the appreciation, Ghairat.

Glad you found the video helpful, Syed.

Thank you, John.

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).

@@finRGB thank you very much for clearing this doubt!

@@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”.

If you'd like to understand CVA, you can watch these (more introductory) videos on the channel before accessing this video: 1) Exposure metrics: kzfaq.info/get/bejne/Zr6IodSazdWniWg.html 2) Valuation Adjustments: kzfaq.info/get/bejne/bdNnpbtzt87VkWg.html 3) CVA for a Bond: kzfaq.info/get/bejne/rLFyiZqKqLfNYY0.html

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.

ZCB: Zero Coupon Bond

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).

Glad that the video was helpful, Jaqueline.

Glad you found the video helpful, Fabio.

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.

Hello Faisal. Kindly send your queries to [email protected].

Thank you for the appreciation, Haythem. Will do a short video on Credit VaR.

@@finRGB Thank you so much, can't wait to see it !

You can find the updated version of the study plan here: www.finRGB.com/frm-part-1-study-plan (includes the machine learning readings).

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.

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.

Thank you for the appreciation, Joseph. Yes sure, will do.

For Case B, the 3m implied SOFR will be 100 - 98.70 = 1.30(%). This will imply a gain / loss on futures position equal to 100 * (98.495 - 98.70) * 25 * 100 = -51,250 (i.e. loss, since it is negative). In this Case B, borrowing cost is 100mn * (1.30% + 2%) * 0.25 = 825,000. Adding the borrowing cost and loss gives the total cost to be 876,250 i.e. same as Case A.

Tks!!

Thank you for the appreciation, Annu.