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Hey Lanky: Can you check out page 7 of this link under III. Bonds. I think this gives me a bit of hope. http://www.imf.org/external/pubs/ft/wp/2006/wp06104.pdf May be we should bring in Dave here...

Path dependency was the answer. Sorry if I stated otherwise.

1) Don't remember the answer exactly but I thought this was quite straightforward. 2) Yes. VAR underestimates as the Traders are doing trades that have more VAR (hence high returns) than what the model would calculate. 3) Yes. Right on. 4) I have posted above on the details on this one... Please...

Damn. Looks like I might have to concede here... Now I am beginning to worry how many questions you have to get right to pass...

Yes to that.

But when you are in the risk neutral world, aren't you supposed to use the risk free rate to discount? If it was not risk neutral world, then you would use actual discount rate. This is getting confusing.

The quesion on 2 bonds of the same value (100M I think) with PD = p on each and independent. They are securitized to issue 100 M senior and 100 M equity tranche. The question was what is the probability of default for the equity tranche. Bond 1 Default Bond 2 Default: Prab = p^2 Bond 1 Default...

Actually, the quesiton on Iris vs. US crisis that said what was part of US but not Irish crisis. B and C was wrong. A was "Government encouraging real estate sector loans" and D was "Increase in mortgage securitization". I thought both was right but I put in D. Not sure.. Anyone has a better idea?

I think RR was given as 0%.

For 2 above, I am pretty sure they said DV01 gap. And it is just plainly wrong choices starting at 700 M. I think GARP is a bit amateurish compared to CFA Institute to be honest. In all three levels of CFA, I never found a single question to be erroneous. Back in 2009 when I did Lvl 1, they had...

Yes. MV = 800,000 FV = 1,000,000 (1 - PD) / ( 1 + rfr) = 0.8 rfr has to be 0 to have PD = 20%... rfr = 5% gives you PD = 16%

@ES - It was 95.5, I just wrote the questions in a hurry Great... @Probability of default - I remember getting 20% with another formula. Frankly, I don't even remember the formulas anymore! I am almost certain it's less than 20% due to rfr being > 0. @Option value - Based on what others have...

In response to Lanky: 1) Implied volatility is assumed to be the center. What will be the effect? (in-the-money call value understated?) I chose out of the money put but I think I screwed up. 2) What did John Rusnak do? (made fake transactions) There was two similar question on Rusnak. One was...

1. I thought Q.79 (Duration dollar matching qustion) had an issue with the question itself. Liability Value = 200 M; Modified Duration = 20 Asset Value = 220 M; Modified Duration = 15 What is the gap in DV01. Answers: 700 M, 1,000 M, 1,100 M, 1200 M I did 700M but how can DV01 could be...

Lanky bro, that's awesome memory... The question on barrier option I thought was a killer, though the exam was unexpectedly easy. Not that I am complaining. Here's how that went. The stock price currently is 40.96. Risk free rate is 2 percent. Given, Up and in option threshold 50 dollars, at...

I will be posting the questions that I remember from the exam. But I wanna make sure that it would not violate GARP ethical guidelines... David, would it be ok?

I think the reason for this is the real world vs. risk neutral probability. PD of 3.96% is risk neutral probability, which when you use in the following formula, you get r = 9% FV/(1+y) = FV*(1-PD)/(1+r) ; Note: Recovery Rate = 0 The Real world probability should be higher than 3.96%, hence...

The answer to your question is Yes.

Any idea when this will be released?

Pass Level I. All 1st Quartile.