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FRM Part I Updated
How is the term premium estimated and why does it matter for risk management?
Term premium is the excess yield beyond expected short-rate paths, estimated via affine models or surveys...
What is an equity-linked note (ELN) and how does its payoff differ from a PPN?
An ELN is structurally a bond plus short put option. Investors earn enhanced yield but face principal loss if the underlying falls below the buffer.
What are smoothing splines and when should I use them over bootstrapping?
Smoothing splines fit continuous curves by balancing pricing accuracy against curvature penalties controlled by lambda...
How do principal protected notes (PPNs) achieve capital preservation while offering equity upside?
A PPN combines a zero-coupon bond (principal guarantee) with a call option (upside). The bank profits from the spread between option cost and embedded value.
How do I bootstrap a zero-coupon yield curve from coupon bond prices for FRM Part I?
Bootstrapping works iteratively from shortest to longest maturity, using previously solved zeros to discount earlier cash flows...
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