2013 FRM part 1 feed back

[nabil1234]

for me in general it was a tuff exam, there was some stupidity in exam structure, the resolvable questions in the first and the hard later after the candidate be loss his ability of consentration.

 

[Aaron14]

One question I remember was a farmer was long at 480 for commodity and he paid -15 for the option and it was 490 to short in order to close out, giving a loss on the total transaction of -5. He then had to purchase the stock at 500 so I had a total loss for farmer on the strategy of -15, i'm unsure if I was just to look at the option portion in isolation to get -5 or the total strategy to get -15, can anyone advise?

I thought this was testing normal backwardation and basis concept so choose -15.

 

[Milan K]

The option was on the future with strike price of 480 for $15. On exercise day, future was 490. So, a net loss of $5..... I guess, spot price was irrelevant here....

One question I remember was a farmer was long at 480 for commodity and he paid -15 for the option and it was 490 to short in order to close out, giving a loss on the total transaction of -5. He then had to purchase the stock at 500 so I had a total loss for farmer on the strategy of -15, i'm unsure if I was just to look at the option portion in isolation to get -5 or the total strategy to get -15, can anyone advise?

I thought this was testing normal backwardation and basis concept so choose -15.

 

[Aaron14]

The option was on the future with strike price of 480 for $15. On exercise day, future was 490. So, a net loss of $5..... I guess, spot price was irrelevant here....

Thanks Milan,

Another nail in the coffin. Disappointig get questions wrong I could do, lesson learned all the same, I need to watch language in questions much better.

Regards

Aaron

 

[nabil1234]

what is about the question talk about struddle and butterfly , my answer was long straddle because the question talk about high change in volatility?

 

[Milan K]

E

what is about the question talk about struddle and butterfly , my answer was long straddle because the question talk about high change in volatility?

Even I think, the question asked about whats the best bet for high volatility.... which is long straddle for sure.....

 

[nabil1234]

E

Even I think, the question asked about whats the best bet for high volatility.... which is long straddle for sure.....

dear Milan, are u sure that the answer was long struddle because some candidate say long butterfly?

 

[over]

Towards the end of the exam there was a question about a team deciding on buiding an interal rating system or using the ratig agencies. I narrowed it down to two choices: Unlikley a bond rated investment grade at the beginnig of the year defaults or at he dpeths of teh business cycle ratings quality is harder to detect (or something like that). Still not sure which is more correct.