Class Notes 2: P/L Time Series Analysis
OVERVIEW
We now begin our journey into risk analytics, and begin with a few key concepts:
Risk Analytics should be simple and understandable; otherwise they serve no useful
purpose.
Often-times, graphical physical d

Chapter 10: Nonparametrics
July 20, 2016
1
Tests of goodness-of-fit
In some problems, before we collect data we have some specific distribution in mind for the
data we will observe. We can test if the data indeed comes from the specified distribution
or n

Chapter 11: Linear regression models
July 27, 2016
We are often interested in understanding the relationship between two or more variables.
Want to model a functional relationship between a predictor (input, independent
variable) and a response variable

Handy Dandy Walkie Talkie
Cast
HOST: an energetic middle-aged man who is of average height.
He has black hair. He is extremely enthusiastic. The host wears
a stylish blazer and always holds a microphone.(Neel Mehta).
DOCTOR WALKIE: a middle aged hair that

Is it possible to completely different people who have not met, or even lived
in the same timeframe be still alike? Two phenomenal writers fit into this category.
Edgar Allan Poe and Arthur Conan Doyle. They both write fictional crime stories
dealing with

Class Notes 9: Remaining Class Sessions, Factor Analysis and Risk Budgeting
In this session, we will cover the following topics, which substantially complete our core risk
analytics toolkit:
Limit Monitoring
P/L Attribution Analysis
These last two topics

Class Notes 10: Practical Applications, Part 1:
As mentioned last week, we have now substantially covered the analytical material that will be
included in the semesters content. We will focus the remaining sessions on:
Practical Examples/Application
Proje

Class Notes 8: Remaining Class Sessions, Factor Analysis and Risk Budgeting
In this session, we will cover the following topics:
Factor Analysis/Stress Testing
Volatility Budgeting
Section 1: Remaining Class Schedule:
Next week, we will cover:
Limit Monit

Class Notes 6: Mid-Term Review and Project Discussion:
SECTION 1: MID-TERM REVIEW:
Following are statistics associated with the grade ranges on the mid-term:
Mean
Standard Deviation
Median
High Score
Low Score
0.778
0.069
0.79
0.915
0.63
HISTOGRAM OF SCOR

Organization of Professional Money Management Community
While everyone is free to trade or invest in the markets, the focus of our
course will be on risk management for professional money management
enterprises.
We define these as entities() that are orga

Class Notes 4: Non-Equity Exposure Analysis
OVERVIEW
We now move to more the modeling of exposure for more complex instruments, most notably
Fixed Income. For our purposes thus far, we can consider that the following asset classes all
have the following r

Class Notes 5: Modeled Measures of Risk
SECTION 1: VALUE AT RISK (VAR)
OVERVIEW
In this section we begin to focus upon the most widely discussed risk measurements, Including:
Value at Risk (VaR)
In the next session we will cover related concepts, such as

Class Notes 2: P/L Time Series Analysis
OVERVIEW
In last weeks session, we covered the concept of risk analytics assuming in part a balance
sheet/income statement approach. We covered many Income Statement components, and now
turn our attention to the Ris

Chapter 9: Hypothesis Testing
July 13, 2016
1
Hypothesis Testing
1.1
Principles of Hypothesis Testing
We consider a statistical problem involving a parameter whose value is unknown
but must lie in a certain space . We consider the testing problem
H0 : 0
v