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I too chose coupon as +ve cash flow. I am not convinced about the logic of coupon being "static cash flow". It's not an easy one to be certain either way.

Not sure Sir, but it's wrong...

If I remember this correctly, the question was for third year default intensity for Baa with the same numbers as the spreadsheet here. I think the answer was 0.426...

If your memory is correct, which I strongly believe it is because I got 32.5 and I am quite certain I used the Libor from the end of the period. But sorry to tell you, Majesta, that it is wrong. We are supposed to use Libor from the start of the swap (see my earlier post today with Hull's...

I really hope you are right... :) Let's try to recreate the problem the best we can. 1. Notional Amount = 200 M (confirmed.) 2. Index went from 9,500 to 11,400, so the rise was (11,400 - 9,500)/9,500 = 1,900/9,500 = 20% (I am pretty sure of this) 3. Floating rate at the start at the initial of...

Dennis: Read this from Hull and you will know why... I too screwed this one up... Honestly, Swaps are not covered in detail in Lvl 2 and I just wish my memory from Lvl 1 back in 2009 was better...

Agreed... For those of us who only used Schweser it is the toughest. I wanted to briefly read up on the exotic options form Hull, but never had time. Now I wish I had done that...

Only GARP can answer your question. The last time I read up on that it goes like this. They get average score of Top 5% test takers. Then they take some percentange of that, which would be the passing score. Eg., If top 5 test takers on average score 95% and they set 80% (this is a variable GARP...

I just remembered one more question. Sorry if it has been posted already. The question was on POT and it asked what distribution would result when PST threshold is high. The answer was Generalized Pareto Distribution. Easy one but thought I should share it. This thread could be a treasure trove...

Read the first paragraph from Hull...

I agree with you absolutely on the GARP's curriculum being repetitive and not very well organized. I am beginning to think GARP is really amateruish and FRM is overrated... I remember reading about CDS in at least 4 different sections and Total Return Swap in just about the same number of times...

The question was to calculate default intensity in year 3. If you follow Hull, you see exactly how it's done.... PD in year 3/prob. of survival upto 2 years... I am pretty certain about this one...

I think you are right on the money in this one. I did exactly the same...

I screwed this one up. Should have used the interest rate at time t=0 but I did t=1... Silly mistake... The answer is indeed 31.5...

Looks like I screwed this one up too... It really should be share price going down as you are short on it... I chose bond price... One more time kicking myself...

I thought paper was too easy at the beginning as well. But it actually it was not. There was so many traps and tricks... But majority here will pass...

I'm too confused about this one as none of the choices made sense. I chose investment in own stock only because it does not specify whether that investment by the bank itself (in which case it not the right answer) or it is by outside party... I think this one was confusing.

Thanks, David. Makes me feel a tad bit better. But just for my info... Would it be fair to make a generic statement that we would use risk free rate to discount expected value of future cash flows using risk neutral probability and we would use rate reflecting the riskiness of the cashflows when...

I thought this one was a bit confusing too... But I went with buy target sell acquirer. But I could be wrong as one should buy undervalude vs. overvalued. Here 3 target shares at 20 each is overvalued relative to 1 acquiring firm share at 58... Not really sure. Hope this is not a trick question...

Hey David: Can you please help me out here... We have a zero coupon bond with Market price of 80,000 with FV of 100,000 maturing in a year. We need to calculate risk neutral PD given riks fre rate of 5% and recovery rate of 0%. Thanks...