Exam Feedback FRM Part 2 (November 2014) Exam Feedback

Prince31

New Member
I had a very different answer from the all the posts that I have seen here on LCR question.
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650

LCR = 650/770= 84.41~85% which was one of the options which i chose.

My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.

Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123% :(


I rechecked even restriction on assets level 2 on HQLA (<40%) and cash inflow to cash outflow (<75%), LCR =123% anyway.
 

JacquesBBB

New Member
Hey it's mentioned for retail customers they have automated process, so it can't be consumer. I put Non financial but not sure as analyst is from a big lender. either Financial or Non financial company[/QU
I had a very different answer from the all the posts that I have seen here on LCR question.
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650

LCR = 650/770= 84.41~85% which was one of the options which i chose.

My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.

Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123% :(
I think your mistake is : Level 2 / (level 1 + Level 2 ) must be less than 40% , ans not Level 2 / level 1.
In this question , no ajustments were nececessarry in the numerator nor in the denominator
 

Roshan Ramdas

Active Member
I had a very different answer from the all the posts that I have seen here on LCR question.
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650

LCR = 650/770= 84.41~85% which was one of the options which i chose.

My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.

Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123% :(
Per observation made by @JacquesBBB, Level 2A is supposed to be 40% of total HQLA
 

Prince31

New Member
Ok got it. Thanks. Checked it with the official BASEL III document as well. The answer should be 123%.

I think your mistake is : Level 2 / (level 1 + Level 2 ) must be less than 40% , ans not Level 2 / level 1.
In this question , no ajustments were nececessarry in the numerator nor in the denominator
 

krenate

Member
anyway.. I think that I need to retake exam, so many stupid mistakes...and these kind of Qs, with this set of wording... which totally were misleading sometime.....
 

Abhishek...

New Member
Subscriber
Has anybody any idea about the changes in the FRM part II syllabus for 2015, I ve tried GARP site but its not updated there, also if someone knows when they will be updated.
 

Hardik84

New Member
Has anybody any idea about the changes in the FRM part II syllabus for 2015, I ve tried GARP site but its not updated there, also if someone knows when they will be updated.

I heard that it should come by Dec first week, I am too waiting for it, let's hope we get it ASAP
 

LittleTurtle

New Member
Garp say that we will have the result no longer than january 2nd.
According to previous year, does anyone know if we will have it sooner ? if yes how much sooner ?

Thanks.
 
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Ank

Member
I am not that confident, but VaR does not measure firmwide risk..which is why I have selected credit risk, due to the thicker tails in the distribution in comparison with peer group...
Exactly why I choose credit risk as option was asymmetric with fat tail but credit risk don't have that much of fat tail its operation risk which has fat tail and asymmetric
 

Ank

Member
Garp say that we will have the result no longer than january 2nd.
According to previous year, does anyone know if we will it sooner ? if yes how much sooner ?

Thanks.
I don't know if its going to be before GARP sent me an email like "Your official exam result will be emailed to you on January 2, 2015.", thanks for the nice 31st night though
 

Ank

Member
I guess around 50 / 80 ( 35 sure + 0,5 *25 + 0,25 * 20) with the following quantile 3 - 2- 1- 3 - 3... No Idee if it is a passing score. The part Op Risk let me some hope for the final result.
I pass Part 1 with 3,3,1,3 and GARP shattered my understanding of quartile scoring
 

frmexam

New Member
I cannot tell, mine depends on the questions that they take out(sampling questions). I messed up quite a few where i did not stick with my first instinct and changed answers in the last 10 min, which i know i lost 5 points. I was good at eliminating to two choices but I chose lot of wrong options at the end. Hoping a little luck comes my way. Part I i felt even worse but came back with 2212 quartiles. This time may not be enough as the competition is higher.
 

LittleTurtle

New Member
I cannot tell, mine depends on the questions that they take out(sampling questions). I messed up quite a few where i did not stick with my first instinct and changed answers in the last 10 min, which i know i lost 5 points. I was good at eliminating to two choices but I chose lot of wrong options at the end. Hoping a little luck comes my way. Part I i felt even worse but came back with 2212 quartiles. This time may not be enough as the competition is higher.

The same. Was less confident about part I and I finish 2-2-1-2.
But I'm a "quant guy" and absolutely no math on part II :(
 

Roshan Ramdas

Active Member
Exactly why I choose credit risk as option was asymmetric with fat tail but credit risk don't have that much of fat tail its operation risk which has fat tail and asymmetric
I don't remember the exact question write up at this point in time.
Just 1 observation -
Credit risk distributions are definitely asymmetric and fat tailed and these features are alot more pronounced when we look at an operational risk distribution.
To that effect, if the question was phrased as "credit risk distribution exhibit fatter tails viz a viz an operational risk distribution",....then yes,...this is an anomaly and the choice of credit risk distribution would be correct. Else, it is wrong.
 
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