一级16年汇总全-2016frm

专业提供CFAFRM全 专业提供CFAFRM全 PartIFRM®eAstheVPofAdvancedDesignationsatKaplanSchweser,Iampleasedtohavetheopportunitytohelpyouprepareforthe2016FRM0Exam.GettinganearlystartonyourstudyprogramisimportantforyoutosufficientlyPrepare.,.Practice.,.Perform™onexamday.ProperplanningwillallowyoutosetasideenoughtimetomasterthelearningobjectivesinthePartIcurriculum.Nowthatyou'vereceivedyourSchweserNotes™,here'showtogetStep1:AccessYourOnline mandlogintoyouronlineaccountusingthebuttonlocatedinthetopnavigationbar.Afterloggingin,selecttheappropriatepartandproceedtothedashboardwhereyoucanaccessyouronlineproducts.Step2:CreateaStudyCreateastudyplanwiththeSchweserStudyCalendar(locatedontheSchweserdashboard).ThenviewtheCandidateResourceLibrar-demandsforanintroductiontocoreconcepts.Step3:PrepareandReadyourOurclear,concisestudynoteswillhelpyoupreparefortheexam.ofeachreading,youcananswertheConceptCheckerquestionsforbetterunderstandingofthecurriculum.AttendaWeeklyAttendourLiveOnlineWeeklyClassorreviewtheon-demandarchivesasoftenasyoulike.OurexpertfacultywillguideyouthroughtheFRMcurriculumwithastructuredapproachtohelpyoupreparefortheexam.(Seeourinstructionpackagestotheright.Visit mtoorder.)PracticewithSchweserPro™izeyourretentionofimportantconceptsandpracticeansweringexam-stylequestionsintheSchweserPro™QBankandtakingseveralPracticeExams.UseSchweser'sQuickSheetforcontinuousreviewonthego.mtoStep4:FinalAfewweeksbeforetheexam,makeuseofourOnlineReviewWorkshopPackage.Reviewkeycurriculumconceptsineverytopic,performbyworkingthroughdemonstrationproblems,andpracticeyourexamtechniqueswithour8-hourliveOnlineReviewWorkshop.UseSchweser'sSecretSauce®forconvenientstudtheStep5:AspartofourOnlineReviewWorkshopPackage,takeaSchweserMockExamtoensureyouarereadytoperformontheactualFRMExam.Putyourskillsandknowledgetothetestandgainconfidencebeforetheexam.

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*Dates,times,andinstructorssubjectto 专业提供CFAFRM全 专业提供CFAFRM全 ARTIBooK1:FOUNDATIONSOFRISKETOTHE2016 READINGASSIGNMENTSANDLEARNINGOBJECTIVESFOUNDATIONSOFRISKMANAGEMENT RiskManagement:AHelicopter CorporateRiskManagement:APrimer ernanceandRiskManagement Whatis FinancialDisasters TheCreditCrisisof

1 RiskManagementFailures:WhatAreTheyandWhenDoTheyHappen?87DelineatingEfficientPortfolios125112:ArbitragePricingTheoryandMultifactorModelsofRiskand125112:ArbitragePricingTheoryandMultifactorModelsofRiskand13513:15714:GARPCodeof169SELF-TEST:FOUNDATIONSOFRISK I8I©2015Kaplan, Page 专业提供CFAFRM全 FRM PARTIBOOK FOUNDATIONSOFRISKMAN©2015Kaplan,Inc.,d.b.a.KaplanSchweser. PrintedintheUnitedStatesofAmerica.ISBN:978-1-4754-3803- PPN:3200-721RequiredDi er:GARP®doesnotendorse,promote,review,orwarranttheaccuracyofthepro servicesofferedbyKaplanSchweserofFRM®relatedinformation,nordoesitendorseanypassrate bytheprovider.Further,GARP®isnotresponsiblefo eesorcostspaidbytheusertoKaplanS Schweser.FRM®,GARP®,andGlobalAssociationofRiskProfesTMaretrademarksownedbytheThesematerialsmaynotbecopiedwithoutwrittenpermissionfromtheauthor.Theunauthorizedduplicationofthesenotesisaviolationofglobalcopyrightlaws.Yourassistanceinpursuingpotentialviolatorsofthislawisgreatlyappreciated. er:TheSchweserNotesshouldbeusedinconjunctionwiththeoriginalreadingsassetforthGARP®.Theinformationcontainedinthesebooksisbasedontheoriginalreadingsandisbelievedtobeaccurate.However,theiraccuracycannotbeguaranteednorisanywarrantyconveyedastoyourultimateexamPage ©2015Kaplan, 专业提供CFAFRM全 EToTHE2016ThankyoufortrustingKaplanSchwesertohelpyoureachyourgoals.Weareverypleased.JustloginusingtheindividualusernameandpasswordthatyoureceivedwhenyoupurchasedtheSchweserNotes.TheSchweserNotesTMconsistoffourvolumesthatincludecompletecoverageofallforeverytopic),andSelf-Testquestionstohelpyoumasterthematerialandcheckyourretentionofkeyconcepts.Toretainwhatyoulearn,itisimportantthatyouquizyourselfoften.WeofferanonlineversionoftheSchweserProTMQBank,whichcontainshundredsofPartIpracticequestionsSchweserofferstwofu.114-hourpracticeexams.Theseexamsareimportanttoolsf thespeedandskillsyouwillneedtopasstheexam.ThePracticeExamsbookcontainsanswerswithfullexplanationsforself-gradingandevaluation.UseyourOnlineAccessto luswhenyouwillstartandwhatdaysoftheweekyoucanthecurriculumintodailyandweeklytaskstokeepyouontrackandhelpyoumonitoryourstudyprogress.©2015Kaplan, 专业提供CFAFRM全 Book

etothe2016ThePartIFRMexamisaformidablechallenge(covering66assignedreadingsand400+quicklyand(atleast70o/o)correctly.250hoursisagoodestimateofthestudytimerequired backgroundsandexperience.TohelpyoureallymasterthismaterialandbewellpreparedfortheFRMexam,weofferOnlineWeeklyandAugustfortheNovemberexam.Thisonlineclassbringsthe alattentionofahavefullaccesstosupplementalon-demand Libraryandan addresslinktousetosendquestionstotheinstructoratanytime.Late-SeasonLate-seasonreviewandexampracticecanmakeallthedifference.OurRevie studying.ThisRevie 4-hourexam),andSchweser'sSecretSauce(concisesummaryoftheFRM ©2015Kaplan, 专业提供CFAFRM全 Book1etothe2016PartIExamInpreparingfortheexam,youmustpayattentiontotheweightsassignedtoeach withinthecurriculum.ThePartIexamweightsareas Exam ExamFoundationsofRisk FinancialMarketsand ValuationandRisk HowtoTherearenoshortcutstostudyingforthisexam.ExpectGARPtotestyouinawaythatsticktoyourstudyplan.Youshould readtheSchweserNotesandcompletetheConceptCheckersforeachtopic.At ofeachbook,youshouldanswertheprovidedSelf-TestIwouldliketotakethisopportunitytothankthecontentdevelopers,editors,andgraphicBottcher;BeccaDargatz;AlissaKnop;DavidGriswold;GenevieveKrets er;LindseyCasto;andJaredHeintzfortheircontributions.BestEricSmith,CFA,FRMKaplanSchweser©2015Kaplan, Page 专业提供CFAFRM全 READINGASSIGNMENTSAND READINGMichelCrouhy,DanGalai,andRobertMark,TheEssentialsofRiskManagement,2ndEdition(NewYork:McGraw-Hill,2014)."RiskManagement:AHelicopterView,"Chapter ernanceandRiskManagement,"Chapter

(page1)(page15)(Hoboken,NJ:JohnWiley&Sons,"WhatisERM?,"Chapter ReneStulz,"Risk-TakingandRiskManagementbyBanks,"JournalofAppliedCorporateFinance27,No.1(2015):8-18. CreditRisk,2ndEdition(NewYork:JohnWiley&Sons,2013)."FinancialDisasters,"Chapter (pageJohnHull,RiskManagementandFinancialInstitutions,4thEdition(Hoboken:JohnWiley&Sons,2015)"TheCreditCrisisof2007,"Chapter ReneStulz,"RiskManagementFailures:WhatareTheyandWhenDoTheyHappen?"FisherCollegeofBusinessWorkingP rSeries,October2008. EdwinJ.Elton,MartinJ.Gruber,StephenJ.BrownandWilliamN.Goetzmann,ModernPortfolioTheoryandInvestment &Sons,2014)."TheStandardCapitalAssetPricingModel,"Chapter (page11 (WestSussex,England:JohnWiley&Sons,Page ©2015Kaplan, 专业提供CFAFRM全 ReadingAssignmentsandLearning''AppgMeasurementIndicators,"Chapter4,Section4.2only ZviBodie,AlexKane,andAlanJ.Marcus,Investments,10thEdition(NewYork:McGraw-Hill,2013).''rrePricingTheoryandMultifactorModelsofRiskandChapter 135)AnthonyTarantinoandDeborahCernauskas,RiskManagementinFinance:SixSigma"InformationRiskandDataQualityManagement,"Chapter BankingSupervisionPublication,January2013). (page157)GARPCodeof ©2015Kaplan, 专业提供CFAFRM全 BookReadingAssignmentsandLearningLEARNINGRiskManagement:AHelicopterAftercompletingthisreading,youshouldbeableExplaintheconceptofriskandcompareriskmanagementwithrisktaking.(page1)Describetheriskmanagementprocessandidentifyproblemsandchallengesthatcanariseintheriskmanagementprocess.(page2)Evaluateandapplytoolsandproceduresusedtomeasureandmanagerisk, tativemeasures,qualitativeassessment,andenterpriseriskmanagement.(page3)Distinguishbetweenexpectedlossandunexpectedloss,andprovideexamplesofeach.(page4)Interprettherelationshipbetweenriskandrewardandexplainhow sofinterestcanimpactriskmanagement.(page5)Describeanddifferentiatebetweenthekeyclassesofrisks,explainhoweachtypeofriskcanarise,andassessthepotentialimpactofeachtypeofriskonananization.(pageCorporateRiskManagement:AAftercompletingthisreading,youshouldbeableEvaluatesomeadvantagesanddisadvantagesofhedgingriskexposures.(page15)Explainconsiderationsandproceduresindeterminingafirm'sriskappetiteanditsbusinessobjectives.(page17)Explainhowacompanycandeterminewhethertohedgespecificriskfactors,includingtheroleofth ofdirectorsandtheprocessofmap (page17)Applyappropriatemethodstohedgeoperationalandfinancialrisks,includingpricing,foreigncurrency,andinterestraterisk.(page19)Assesstheimpactofriskmanagementinstruments.(page ernanceandRiskManagementAftercompletingthisreading,youshouldbeableto:Compareandcontrastbestpracticesincorporate ernancewiththoseofriskmanagement.(page27)Assesstheroleandresponsibilitiesofth ofdirectorsinrisk (page29)Evaluatetherelationshipbetweenafirm'sriskappetiteanditsbusinessstrategy,includingtheroleofincentives.(page31)Distinguishthedifferentmechanismsfortransmittingrisk ernancethroughout anization.(page29)Illustratetheinterdependenceoffunctionalunitswithinafirmasitrelatestoriskmanagement.(page31)Assesstheroleandresponsibilitiesofafirm'sauditcommittee.(pagePage ©2015Kaplan, 专业提供CFAFRM全 ReadingAssignmentsandLearningWhatisAftercompletingthisreading,youshouldbeableDescribeenterpriseriskmanagement(ERM)andcompareandcontrastdifferingdefinitionsofERM.(page37)ComparethebenefitsandcostsofERManddescribethemotivationsforafirmtoadoptanERMinitiative.(page38)Describetheroleandresponsibilitiesofachiefriskofficer(CRO)andassesshowtheCROshouldinteractwithotherseniormanagement.(page40)DistinguishbetweencomponentsofanERMprogram.(page41)Aftercompletingthisreading,youshouldbeableAssessmethodsthatbankscanusetodeterminetheiroptimallevelofriskexposure,andexplainhowtheoptimallevelofriskcandifferacrossbanks.(page47)Describeimplicationsforabankifittakestoolittleortoomuchriskcomparedtoitsoptimallevel.(page48)Explainwaysinwhichriskmanagementcanaddordestroyvalueforabank.(page48)Describestructuralchallengesandlimitationstoeffectiveriskmanagement,includingtheuseofVaRinsettinglimits.(page49)Assessthepotentialimpactofabank's ernance,incentivestructureandriskcultureonitsriskprofileanditsperformance.(page51)Aftercompletingthisreading,youshouldbeable yzethekeyfactorsthatledtoandderivethelessonslearnedfromthefollowingriskmanagementcasestudies:ChaseManhattanandtheirinvolvementwithDrysdaleKidderAlliedIrishUnionBankofSwitzerlandSocieteLongTermCapitalManagementBankers an,Citigroup,andEnron(pageAftercompletingthisreading,youshouldbeable yzevariousfactorsthatcontributedtotheCreditCrisisof2007andexaminetherelationshipsbetweenthesefactors.(page76)Describethemechanicsofasset-backedsecurities(ABS)andABScollateralizeddebtobligations(ABSCDOs)andexplaintheirroleinthe2007creditcrisis.(page77)Explaintherolesofincentivesandregulatoryarbitrageinthe eofthecrisis.(page80)Applythekeylessonslearnedbyriskmanagerstothescenariosprovided.(page81)©2015Kaplan, 专业提供CFAFRM全 BookReadingAssignmentsandLearningRiskManagementFailures:WhatAreTheyandWhenDoTheyAftercompletingthisreading,youshouldbeableExplainhowalargefinanciallossmaynotnecessarilybeevidenceofariskmanagementfailure.(page87)yzeandidentifyinstancesofriskmanagementfailure.(pageExplainhowriskmanagementfailurescanariseinthefollowingareas:measurementofknownriskexposures,identificationofriskexposures,communicationofrisks,andmonitoringofrisks.(page88)Evaluatetheroleofriskmetricsand yzethe ingsofexistingriskmetrics.(page90)Aftercompletingthisreading,youshouldbeableUnderstandthederivationandcomponentsoftheCAPM.(page1Describetheassumptionsunderlyingthe (page1Interpretthecapitalmarketline.(page111ApplytheCAPMincalculatingtheexpectedreturnonanasset.(page1Interpretbetaandcalculatethebetaofasingleassetorportfolio.(page1Aftercompletingthisreading,youshouldbeableCalculate,compare,andevaluatetheTreynormeasure,theSharpemeasure,Jensen'salpha.(pageComputeandinterprettrackingerror,theinformationratio,andtheSortinoratio.(page128)ArbitragePricingTheoryandMultifactorModelsofRiskandAftercompletingthisreading,youshouldbeableDescribetheinputs,includingfactorbetas,toamultifactormodel.(page135)Calculatetheexpectedreturnofanassetusingasingle-factorandamulti-factormodel.(page136)Describepropertiesofwell-diversifiedportfoliosandexplaintheimpactofdiversificationontheresidualriskofaportfolio.(page138)Explainhowtoconstructaportfoliotohedgeexposuretomultiplefactors.(page140)DescribeandapplytheFama-Frenchthreefactormodelinestimatingassetreturns.(page141)InformationRiskandDataQualityAftercompletingthisreading,youshouldbeableIdentifythemostcommonissuesthatresultindataerrors.(page1Explainhowafirmcansetexpectationsforitsdataqualityanddescribesomekeydimensionsofdataqualityusedinthisprocess.(page150)Describetheoperationaldata ernanceprocess,includingtheuseofscorecardsinmanaginginformationrisk.(page152)Page ©2015Kaplan, 专业提供CFAFRM全 ReadingAssignmentsandLearning PrinciplesforEffectiveRiskDataAggregationandRiskReportingAftercompletingthisreading,youshouldbeableto:Explainthepotentialbenefitsofhavingeffectiveriskdataaggregationandreporting.(page157)Describe ernanceprinciplesrelatedtoriskdataaggregationandreportingpractices.(page158)IdentifythedataarchitectureandITinfrastructurefeaturesthatcancontributetoeffectiveriskdataaggregationandriskreportingpractices.(page159)Describecharacteristicsofastrongriskdataaggregationcapabilityandhowthesecharacteristicsinteractwithoneanother.(page159)Describecharacteristicsofeffectiveriskreportingpractices.(pageGARPCodeofAftercompletingthisreading,youshouldbeableDescribetheresponsibilityofeachGARPmemberwithrespecttoprofessionalintegrity,ethicalconduct, sofinterest, ityofinformationandadherencetogenerallyacceptedpracticesinriskmanagement.(page170)DescribethepotentialconsequencesofviolatingtheGARPCodeofConduct.(page172)©2015Kaplan, Page 专业提供CFAFRM全 专业提供CFAFRM全 ThefollowingisareviewoftheFoundationsofRiskManagementprinciplesdesignedtoasthelearningRISKAHELICOPTERVITopicEXAMThisisanintroductorytopicthatprovidescoverageoffundamentalriskmanagementconceptsthatwillbediscussedinmu oredetailthroughouttheFRMcurriculum.Fortheexam,itisimportanttounderstandt eralriskmanagementprocessandits ings,theconceptofunexpectedloss,andsomeoftheunderlyingpointsregardingtherelationshipbetweenriskandreward.Also,thematerialonthemaincategoriesoffinancialandnon-financialriskscontainsseveraltestableconcepts.THECoNCEPTOFLO1.1:ExplaintheconceptofriskandcompareriskmanagementwithriskRiskarisesfromtheuncertaintyregardinganentity'sfuturelossesaswellasfuturegains.Therefore,insimplifiedterms,thereisanaturaltrade-offbetweenriskandreturn.Riskisnotnecessarilyrelatedtothesizeofthepotentialloss.Forexample,manypotentiallossesarelargebutarequitepredictableandcanbeprovidedforusingriskmanagementtechniques.Themoreimportantconcernisthevariabilityoftheloss,especiallyalossthatcouldrisetounexpectedlyhighlevelsoralossthatsuddenlyoccursthatwasnot&astartingpoint,riskmanagementincludesthesequenceofactivitiesaimedtoreduceoreliminateanentity'spotentialtoincurexpectedlosses.Ontopofthat,thereistheneedtomanagetheunexpectedvariabilityofsomecosts.Inmanagingbothexpectedandunexpectedlosses,riskmanagementcanbethoughtofasadefensivetechnique.However,riskmanagementisactuallybroaderinthesensethatitconsidershowanentitycanconsciouslydeterminehowmuchriskitiswillingtotaketoearnfutureuncertainreturns,whichinvolvesrisktaking.Risktakingrefersspecificallytotheactiveassumptionofincrementalriskinordertogenerateincrementalgains.Inthatregard,risktakingcanbethoughtofinanopportunistic©2015Kaplan, Page 专业提供CFAFRM全 LO1.2:Describetheriskmanagementprocessandidentifyproblemsandchallengesthatcanariseintheriskmanagementprocess.TheriskmanagementprocessinvolvesthefollowingfiveStep1:IdentifytheStep2: fyandestimatetheriskexposuresordetermineappropriatemethodstotransfertherisks.Step3: Determinethecollectiveeffectsoftheriskexposuresorperformacost-benefitysisonrisktransfermethods. Developariskmitigationstrategy(i.e.,avoid,transfer,mitigate,orassume AssessperformanceandamendriskmitigationstrategyasInpractice,thisprocessisnotlikelytooperateperfectlyintheabovesequence.Twokeyproblemswiththeprocessincludeidentifyingthecorrectrisk(s)andfindinganefficientmethodoftransferringtherisk.Oneofthechallengesinensuringthatriskmanagementwillbebeneficialtotheeconomyisthatriskmustbesufficientlydispersedamongwillingandableparticipantsintheeconomy.Unfortunay,anotablefailureofriskmanagementoccurredduringthefinancialcrisisbetween2007and2009whenitwassubsequentlydiscoveredthatriskwastooconcentratedamongtooferticipants.Anotherchallengeoftheriskmanagementprocessisthatithasfailedtoconsistentlyassistinpreventingmarketdisruptionsorpreventingfinancialaccountingfraud(duetocorporateernancefailures).Forexample,theexistenceofderivativefinancialinstrumentsgreatlyfacilitatestheabilitytoassumehighlevelsofriskandthetendencyofriskmanagerstofolloweachother'sactions(e.g.,sellingriskyassetsduringamarketcrisis,whichdisruptsthemarketbyincreasingitsvolatility).Inaddition,theuseofderivativesascomplextradingstrategiesassistedinoverstatingthefinancialposition(i.e.,netassetsonbalancesheet)ofmanyentitiesandunderstatingthelevelofriskassumedbymanyentities.Evenwiththebestriskmanagementpoliciesinplace,usingsuchinaccurateinformationwouldnotallowthepoliciestobeeffective.Finally,riskmanagementmaynotbeeffectiveonanoveralleconomicbasisbecauseitonlyinvolvesrisktransferringb epartyandriskassumptionbyanotherparty.Itdoesnotresultinoverallriskelimination.Inotherwords,riskmanagementcanbethoughtofasazero-sumgameinthatsome"winning"partieswillgainattheexpenseofsome"losing"parties.However,ifenoughpartiessufferdevastatinglossesduetoanexcessiveassumptionofrisk,itcouldleadtoawidespreadeconomiccrisis.Page ©2015Kaplan, 专业提供CFAFRM全 TopicCrossReferencetoGARPAssignedReading-Crouhy,Galai,andMark,ChapterMEASURINGANDMANAGINGrisk,including Valueatrisk(VaR)statesacertainlossamountanditsprobabilityofoccurring.Forexample,afinancialinstitutionmayhaveaone-dayVaRof$2.5millionatthe950/oconfidencelevel.Thatwouldbeinterpretedashavinga5oochancethattherewillbealossgreaterthan$2.5milliononanygivenday.VaRisausefulmeasureforliquidpositionsoperatingundernormalmarketcircumstancesoverashortperiodoftime.Itislessusefulandpotentiallydangerouswhenattemptingtomeasureriskinnon-normalcircumstances,inilliquidpositions,andoveralongperiodoftime.TofurtherillustratetheconceptofVaR,assumeyouhavegathered1,000monthlyreturnsforasecurityandproducedthehistogramshowninFigure1.YoudecidethatyouwanttocomputethemonthlyVaRforthissecurity onfidencelevelof95o.Ata950/oconfidencelevel,thelowertaildisplaysthelowest5oooftheunderlyingdistribution'sreturns.Forthisdistribution,thevalueassociatedwitha95°/oconfidencelevelisareturn-15.5o.Ifyouhave$1,000,000investedinthissecurity,theone-monthVaRis$155,000(-15.5x$1,000,000).Figure1:HistogramofMonthly;:> uv v�

ofMonthly©2015Kaplan, 专业提供CFAFRM全 sor'sNote:ThiscalculationisanexampleofhistoricalVtzR.InBook4,VtzR,andMonteCarlosimulationVtzR.Economiccapitalreferstoholdingsufficientliquidreservestocoverapotentialloss.Forexample,ifone-dayVaRis$2.5millionandtheentityholds$2.5millioninliquidreserves,thenitisunlikelytogobankruptthatday. ysistakesintoaccountpotentialriskfactorswithuncertaintiesthatareoften fiable.Oneoptionistoconsideranadversescenarioorworst-casescenarioysistogetanideaofthefullmagnitudeofpotentiallosseseveniftheyhaveaverysmallchanceofoccurring.Worst-casescenario ysisinvolvesexaminingtheeffectsofpossiblemacroeconomicscenariosontheentityandwithinitsvariousdivisions,oftentakingintoaccountseveralcategoriesofrisk.Stresstestingisaformofscenario ysisthatexaminesafinancial ebasedonagiven"stress"ontheentity.Forexample,itisplausibleforinterestratesorunemploymentratestoriseseverelyinaneconomiccrisisandstresstestingattemptstoexaminesuchcrisissituationstodeterminethe eontheentity.ERMtakesanintegrativeapproachtoriskmanagementwithinanentireentity,dispensingofthetraditionalapproachofindependentlymanagingriskwithineachdepartmentordivisionofanentity.ERMconsidersentity-widerisksandtriestointegrateriskconsiderationsintokeybusinessdecisions.Similartotraditionalapproaches,ERMmakesuseofmeasuressuchaseconomiccapitalandstresstesting.Seniorriskcommitteesmayexistwithintheentitytoensurethatrisksaffectingtheentireentityareexamined.WithintheERMframework,theentityanditsboardofdirectorsagreeonspecificriskexposureEXPECTEDANDUNEXPECTEDexamplesofeach.Expectedlossconsidershowmuchanentityexpectstoloseinthenormalcourseofbusiness.Itcanoftenbecomputedinadvance(andprovidedfor)withrelativeeasebecauseofthecertaintyinvolved.Forexample,aretailbusinessthatprovidescredittermsonsalesofgoodstoitscustomers(i.e.,noneedtopayimmedia y)incurstheriskofnon-paymentbysomeofthosecustomers.Ifthebusinesshasbeeninoperationforatleastafewyears,itcoulduseitsoperatinghistorytoreasonablyestimatethepercentageofannualcreditsalesthatwillneverbecollected.TheamountofthelossisthereforepredictableandistreatedasaregularcostPage ©2015Kaplan, 专业提供CFAFRM全 TopicCrossReferencetoGARPAssignedReading-Crouhy,Galai,andMark,Chapter ngbusiness(i.e.,baddebtexpenseonthe estatement).Itcanbepricedintothecostofthegoodsdirectlyinthecaseoftheretailbusiness.Incontrast,inlinesofbusinessinthefinancialsector,thecostcouldberecoveredbychargingcommissionsonvariousfinancialtransactionsorbyimplementingspreadsbetweenafinancialinstitution'slendingratetoborrowersanditscostofobtainingthosefunds.Unexpectedlossconsidershowmuchanentitycouldloseoutsideofthenormalcourseofbusiness.Comparedtoexpectedloss,itisgenerallymoredifficulttopredict,compute,andprovideforinadvancebecauseoftheuncertaintyinvolved.Forexample,consideracommercialloanportfoliothatisfocusedonloanstoautomotivemanufacturingcompanies.Duringaneconomicexpansionthatfavorssuchcompanies(becauseindividualshavemoredisposable etospendonitemssuchasautomobiles),thelenderwillrealizeveryfew,ifany,loandefaults.However,duringaneconomicrecession,thereislessdisposable etospendandmanymoreloandefaultsarelikelytooccurfromborrowers,likelyatthesametime.Thisisanexampleofcorrelationrisk,whenunfavorableeventshappentogether.ThecorrelationriskdrivesupthepotentiallossesunexpectedAnotherexampleofcorrelationrisklieswithrealesta oanssecuredbyrealproperty.Borrowerstendtodefaultonsuchloans(i.e.,defaultraterisk)atthesametimethattherealpropertyvaluesfall(i.e.,recoveryraterisk-thecreditor'scollateralisworthless,therebycompromisingtherecoveryrateonthefundslenttotheborrowers).Thesetworisksoccurringsimultaneouslycoulddriveupthepotentiallossestounexpectedlevels.Realizingtheexistenceofcorrelationriskshelpsariskmanagermeasureandmanageunexpectedlosseswithsomewhatmorecertainty.Forexample,historical ysisoftheextentofsuchlossesinthepastduetocorrelationriskcouldbeperformed,takingintoaccountwhichriskfactorswereinvolved.RISKANDLO1.5:Interprettherelationshipbetweenriskandrewardandexplainhowsofinterestcanimpactriskmanagement.Aspreviouslymentioned,thereisatrade-offbetweenriskandreward.Inverygeneralandsimplifiedterms,thegreatertherisktaken,thegreaterthepotentialreward.However,onemustconsiderthevariabilityofthepotentialreward.Theportionofthevariabilitythatismeasurableasaprobabilityfunctioncouldbethoughtofasriskwhereastheportionthatisnotmeasurablecouldbethoughtofasuncertainty.Therelationshipbetweenriskandreturnappearseasiertoexaminewithpubliclytradedsecurities.Forexample,consider esecurities. ernmentbondshavelesscreditriskthancorporatebondsingeneral,sothepricingtakesintoaccountthattheyieldspreadsf overnmentbondsarenarrowerthancorporatebondsacrossvariousmaturities.However,foragivenmaturity,thefullrelationshipbetweenriskandreturngoesfurtherthanmerelycreditrisk(e.g.,liquidityrisksandtaxationimpactsmaymaketherelationshiplessclear).Additionally,therisktolerances(i.e.,abilityandwillingnesstotakeoncertainrisks)ofmarketparticipantsmaychangeovertime.Whenrisktolerancesarehigh,the©2015Kaplan, Page 专业提供CFAFRM全 spreadbetweenrisklessandriskybondsmaynarrowtoanabnormallylowlevel,whichagaindisguisesthetruerelationshipbetweenriskandreturn.Examiningtherelationshipbetweenriskandreturnismadeevenmorechallengingwhendealingwithno