# Tag Info

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A CFO typically is not involved in managing risk, though that's not always the case. If your hypothetical CFO is involved in the day-to-day managing of FX risk, the following could be useful: MtM VaR & Stressed VaR Expected shortfall Correlation between traded currency pairs Sensitivities (Greeks) If your hypothetical CFO isn't involved in the ...

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For business purposes, a CFO/CEO typically won't be interested at low-level modeling. Metrics such as: Maximum portfolio gross/net exposure (hence gross/net leverage) Maximum per trade size per product Maximum intraday exposure per product are probably among the more important ones for business decisions.

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Offer rates for options and currency futures. Upcoming publications for economic indicators for short term FX exposure. Future interest rate decisions for long term exposure. Regression for predicting trends. An equation I made for potential risk exposure: x = Days of exposure. p = Current price. delta = Historical daily price changes. Subscript is how ...

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If you provided a source for your definition of "credit exposure" and "wrong-way risk", we could probably give an answer more easily. Credit exposure is not "conditional on default". It basically represents how much a counterparty owes you at a given time $t$. When you compute the CVA, you usually assume that the correlation between counterparty credit ...

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The marginal CVA depends on every other trade in the netting set. This implies that adding a trade to the portfolio changes the marginal CVA of all the other existing trades in the portfolio. Why is that problem? Imagine you only charge the client for the marginal CVA of each new trade. Since adding a new trade changes the CVA allocated to previously ...

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TL;DR Risk avoidance is not taking on the risk in the first place by not investing in the product that has the said risks.Risk transfer is akin to buying insurance. You make the investment, are exposed to the risk, but are protected if it happens. The board of directors sets the firm's risk appetite which is what risks investments they are willing to be ...

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The risk neutral drift is the risk free rate for an asset with no dividends, no cost of carry, no repo cost, etc. Otherwise the drift has to be adjusted to take these into account, and the easiest way to do it (when available) is to use forwards (equal to the expected asset value under the forward measure) or futures (equal to the expected asset value under ...

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With some help of Wikipedia I pieced together an answer, the meat is in this IMF paper. First a definition: Re-hypothecation occurs when banks or broker-dealers re-use the collateral posted by clients such as hedge funds to back the broker's own trades and borrowing. Indeed, a daisy chain involving enormous amounts was created before the Lehman ...

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Although binary option is not as liquid and common as European option, it makes perfect sense. There is only two possibility in payoff in your scenario: 100 or nothing. The cost of the option is therefore cheaper than an European option with everything else equal. Binary option can be replicated by two call options around the strike (see diagram). ...

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You're going to have to do a lot of guesswork, obviously, so it's best to keep things mathematically simple. First off, choose a "certainty level" as some quantile $q$, perhaps around 0.9, and the corresponding normal variate $z=N^{-1}(1-q)$. Start by figuring out how much time $T_i$ you think each position $N_i$ will take to liquidate if necessary. Then ...

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Generally if they are missing a completely at random data in few places, you do not have to be worried. I advice you to use one of the technics of imputation: - Previous value - cannot be used in this case - Educated Guessing - you have "knowledge" about the data, you can try to use some interpolation in your mind. - Common-Point Imputation - try to ...

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