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I came across this forum after I completed level 1 in Dec 14 and was looking for some information about what others thought about the exam while waiting for the results. I am putting in my comments hoping it would prove useful to other candidates in future. I passed with 21222. I used both...

Passed, but results yet to be displayed

Twol84 wrote: "Sorry for coming across as harsh, but blaming Garp for going with something that is done pretty commonly in both the literature and the market isn't constructive. Blame them for something worthwhile, like not providing erasers." I agree. I think this problem is clear. I missed...

I think this is Credit Linked Notes. When you sell a credit linked note to protect yourself, you are paid upfront. If there is default, you just pay them less than what you received. Looks like you credit exposure in this case is smaller.

From a.lesnar: "Thanks for the information, but I am convinced there was no hypothesis on the volatility, neither on correlation. The question just stated that the firm went into financial distress. I just found out that in Schweser material the mean value of both senior and subordinated bonds...

Does anybody remember the exact question on the netting benefit? I can't. I thought question was about netting benefit and chose (b). If the question was about netting factor, then the netting factor should decrease as the number of trades netted increase, all things being equal. However if the...

with respect to this: dundakingNew Member New I think I chose both decrease. I kinda remember something about how mezzanine debt at high levels of default rates acts like senior bonds when pd increases holding correlation constant. The opposite is true i.e. it acts like equity when pd rates...

This is a question from the Stulz reading. This is not from the readings on the tranches of CDO (where correlation between tranches is a factor). In fact Bionic Turtle appears to address this. Here is a question from Stulz: 404.2. Assume a firm with only two classes of debt: senior debt...

I meant to write "when it is in good times it behaves like senior bonds"

a.lesnar, I think when a firm is in distress, the subordinated debt behaves like equities. When it is in good times, it behaves like bonds. So I think chose that senior debt will decrease and subordinated debt will increase. I think it is the behavior of the subordinated debt that is ambiguous...

I have only ever taken one Garp exam before this: Nov 14 Level 1. When it ended, I thought I lacked enough time and I was surprised I passed very well. Three of my results were in the first quartile of performance. This time around, I read the books and used BT for revision. I felt there was...

What is moneyless? Stock price - strike price. strike price is constant. In John the graph is captioned "variation of delta with stock price for a call option and a put option on a non dividend paying stock".

Yes, this is a similar graph. As the underlying in this graph decreases, put delta increases from -1 , approaching zero when the price of underlying approaches zero.

Sorry I wanted to say decrease/increase for call/put.

I am now confused. I think increase/decrease is the case for call/put. I think the graph convinces me. In the exam I followed the intuition of delta from real life and from level 1. Now being forced to reflect on this it is easy to become confused.

Yes you are right

if you can read the chapter "Delta Hedging" in "Options, Future and other derivatives" by John Hull you will see this clearly with a couple of graphs of how put and call delta behave as stock price changes. Delta is the rate of change of the derivative with respect to the change in price of the...

TwoL84 you wrote 16. Call Put Delta [ Call delta decrease , put delta increase ] -- Decrease/decrease. Put delta drops with moneyness. Are you saying decrease/decrease is the answer? I think call delta decrease, put delta increase. Both can't move in the same direction. If have sold a call...