Credit risk for 2013

[RiskNoob]

Hi David,

Thank you for posting 2013 T6 notes! It must have been tough work in this pressing time since more than half of the T6 chapters got replaced this year.

I notice that T6 is quite a bit of HUGE topic (BT note has ~200 pages, although it has some PQs, and also it is the thickest Part 2 book from GARP, (well, some huge Basel readings, such as Basel II Accords, are excluded in the P2 OR book).

However, personally, T6 is the only topic that I haven't touched so far, and I don't want to spend more than a month for this topic for the May exam due to time constraints (late book arrival from GARP, fulltime work...). Now that you have compiled T6 topic, I am wondering if you notice any T6 topics (especially the new ones) that could be time-trap or low-testability from your perspective - I plan to read/do all of T6 BT note & PQs, but I need to skip some core readings in T6...

Thanks,

RiskNoob

 

[David Harper CFA FRM]

Hi RiskNoob,

Thanks! Yes, I have been thinking about this (because I really look forward to speaking with GARP about T6 at the next opportunity to ask, what were you thinking?). I can say with high confidence that for 2013 the "time-trap" lies in the technical (advanced) aspects of Jon Gregory: many of his technical concepts and discussion have very little chance of getting onto this year's exam. I do not refer to introductory counterparty risk concepts, which remain very testable; for example, you do want to spend time on the metrics (e.g., current exposure, EE, PFE), basic exposure profiles, conceptual MCS (e.g., what process might we assume for equities, FI?), and mitigants. But most of that is contained in the earlier portions of (to some extent Malz &) Gregory.

Where I would not get time-trapped is the technical/quantitative concepts in later Gregory: GARP has yet to produce a single question (sample or otherwise) to query this yet, I don't know why they assigned so much of Gregory, he is way over-assigned versus testability. For example, look at the GARP sample exams: I don't see a single Gregory question?! The counterparty questions are all squarely in the "introductory" segments.

CVA is the prime example: I frankly would not go deep (I mean, unless you want to out of intrinsic interest, Gregory is the best text although the organization is a bit woeful with overlaps, we totally supported it, we just had no idea that he'd show up this much but ...). In the notes, i included last year's Canabarro CVA because it's more accessible, quantitatively, and they have yet to test a simple calculation of CVA (to my knowledge), so the odds of a difficult CVA calculation have got to be pretty near zero (qualitative? yes, i would study it qualitatively, but that requires far less time).

That's my summary guidance: introductory/foundation counterparty risk (e.g., CVA) is clearly important, but as you go deeper into Gregory, you can increasingly tilt toward the qualitative/conceptual because the advanced counterparty quant has ~ zero chance of appearing (in 2013, we'll see if/how it seasons).

I'll definitely have more practical guidance in the videos, but I hope that helps, thanks!

 

[RiskNoob]

Thank you David! This comment is extremely valuable and would help to prepare T6 topics from the FRM exam perspective - I will spend less time on Gregory's qaunt topics.

Wish BT folks, including myself, could support the high turn-over rate for the core-reading. I agree with you, this is simply unacceptable, especially from Prep. provider's perspective.

P.S. I see improvements in the new notes, (e.g. putting AIMs in the table of contents, substituting PQs at the end of chapters etc.) which are mostly good. I see few minor (good) things that are missing in the new notes though - Big Chapter title, border lines betweeen AIMs level... these minor cosmetic things helped me spot the contents I want quickly but maybe it is just me..

RiskNoob

 

[David Harper CFA FRM]

P.S. I see improvements in the new notes, (e.g. putting AIMs in the table of contents, substituting PQs at the end of chapters etc.) which are mostly good. I see few minor (good) things that are missing in the new notes though - Big Chapter title, border lines betweeen AIMs level... these minor cosmetic things helped me spot the contents I want quickly but maybe it is just me. RiskNoob

Thanks RiskNoob, I am flagging this for consideration (especially the border line between AIMs; it's true we've lot that but maybe we should take another look - easy to change). Thanks for the feedback, truly,

 

[Suzanne Evans]

RiskNoob,

Thank you for your suggestions. Please re-download T6 notes and let us know if that newest version helps

Thanks,
Suzanne

 

[David Harper CFA FRM]

Thanks for incorporating RiskNoob's suggestion Suzanne, that was fast

 

[RiskNoob]

Thank you Suzanne and David! It is nice to see them back I had printed some pages in T6 notes with black & white before the update, so I did not notice that AIM has teal colour... anyways, it is even better with borderlines... Awesome!

RiskNoob

 

[-MaNi-]

Thank you David for the advice in regards to the level of testability of some topics, very useful! Is it possible for you to do a very short summary of what material we should focus more and less on for each book going forward?

 

[David Harper CFA FRM]

Hi -MaNi- ,

I would love to do that, but realistically, since I'm working hard to recover our target calendar (I need to start the videos on time), I just won't have time for that before this May exam. As with the focus reviews, I will absolutely do that in the May to Nov segment. Thanks,

 

[FRMStrawberry]

Hi David,

Thanks a lot for the updated T6 notes. It's my 2nd time to take Part II in this May. I am wondering if I can only focus the notes and do the practice questions as much as I can.

Thanks.

 

[David Harper CFA FRM]

Hi FRMStrawberry, thanks, my pleasure. You can see we are striving to improve the utility and comprehensiveness of the notes, however, even after the May 2013 versions have been updated, I will not be comfortable asserting they are sufficient standalone resources (I just don't believe that). Strategies can vary, I don't even think one size fits all, but my own bias is that practice questions are the most important resource, so actually if time is short, i'd probably recommend somebody work questions as the priority (and use the readings as a resource while working questions). A lot of the questions that I am writing nowadays are more like this (e.g., with answers that extract source readings; my high usage of EXCEPT FOR reflects a strategy to include positive concepts), so the density of our questions reflects this belief the "engagement" via practice questions is superior to (passive) reading ... so i sort of think that PQ >> any readings/notes, thanks,

 

[FRMStrawberry]

Hi David,

Thanks a lot for the information. I had the GARP textbook from Nov2012 sitting. I know there are lots of changes for credit risk section in this May exam.
Should I order the new GARP textbook?
Also I just bought the most basic BT notes. Where can I find more practice questions?

Thanks a lot.

 

[RiskNoob]

Hi David,

Thanks a lot for the information. I had the GARP textbook from Nov2012 sitting. I know there are lots of changes for credit risk section in this May exam.
Should I order the new GARP textbook?
Also I just bought the most basic BT notes. Where can I find more practice questions?

Thanks a lot.

Hello FRMStrawberry

Probably not, the core reading from GARP is pretty costly... You can always buy the individual chapters (soft copies) from GARP library, including the new T6 chapters for 2013.

As for the PQs, you can either go to the PQ forums for individual PQs in each topic (T1~T9), OR click how-to, Practice Questions... you can see compiled PQs in PDF format.

RiskNoob

 

[David Harper CFA FRM]

Thanks RiskNoob for the help!

FRMStrawberry You should refer to the Study Planner where the default (Sort by Topic) groups the Practice Question PDFs (yellow icons) together (please note, like the rest of the material, they gradually update), thanks,

 

[Mark W]

Hi FRMStrawberry, thanks, my pleasure. You can see we are striving to improve the utility and comprehensiveness of the notes, however, even after the May 2013 versions have been updated, I will not be comfortable asserting they are sufficient standalone resources (I just don't believe that). Strategies can vary, I don't even think one size fits all, but my own bias is that practice questions are the most important resource, so actually if time is short, i'd probably recommend somebody work questions as the priority (and use the readings as a resource while working questions). A lot of the questions that I am writing nowadays are more like this (e.g., with answers that extract source readings; my high usage of EXCEPT FOR reflects a strategy to include positive concepts), so the density of our questions reflects this belief the "engagement" via practice questions is superior to (passive) reading ... so i sort of think that PQ >> any readings/notes, thanks,

Could not agree with this more. Question practice until you drop is the only way to really concrete your understanding...I love the 'except for' approach. Real value for money question practice... The question set and learning process would be so much poorer if 2/3 of the other answers were dummy choices, so thanks again David.

FRMStrawberry: For what it's worth I tend to read the notes through once (annotating as I go) and ensure I 'understand' all concepts (it will also start the brain subconsciously processing). I mark a fair amount of the text especially in P2 as 'L+C' (learn and churn). This is stuff that will find its way into the memory bank through repeating questions or that you can whack in the short term bank the week before the exam. For me this is the most important distinction in any exam...separating what actually requires understanding vs. what is regurgitative in nature (all exams necessarily are to some extent).

Oh, and regarding the harder concepts...you can read and 'understand' something, but questions really test if you know it.

 

[David Harper CFA FRM]

Mark W thank you for appreciating the role of "except for" in questions, it takes longer to write an "except for" but I'm delighted you think they are more effective (I do, too, obviously ... for the simple reason that my own learning seems to be better when I write an "except for")

 

[FRMStrawberry]

Mark W, thanks a lot for your frank suggestions. So your strategy will be focusing on the notes and practicing questions. Aslo you mark the part needs to be memorized and will focus on them right before the exam. I like this strategy too. Have you purchased other practice questions from other sources or you only obtain these questions from BT website and GARP website?

@David, again I am very curious to know where I can find more practice exams.
I know the questions available to me will be:
1. Questions at the end of each section in the updated notes.
----Are these questions good enough for me to practice?
2. Quiz posted on this website
-----Is there anyway I can find the complete list of them in a PDF file? thanks a lot.
3. GARP exams.
4. BT Mock Exams.

If I have chance to practice all the above questions, will it be helpful and good enough?

thanks.

 

[David Harper CFA FRM]

FRMStrawberry

You want to use the Study Planner @ http://www.bionicturtle.com/my-account/study-planner

The daily questions are collected/annotated into the PDF sets (icon = question mark); for example, Suzanne will soon be posting several Topic 1 (Foundations updates). The PDFs in the Planner include our Mocks (and several annotated GARP sample exams). So you really don't need much else, except you'd want the 2013 GARP sample, which i have not yet annotated (i will dribble out annotation slowly on that). Thanks,

 

[Mark W]

@ FRMStrawberry, yes I only use BT materials. If you do every question on the BT website (maybe unlikely given time constraints) and more importantly, understand them then you will not need much further resource. I used only used BT materials for P1 and found the exam straightforward.

You can always google around once you've isolated exactly which topics you struggle with for further explanations.

 

[FRMStrawberry]

@David, Thanks for showing me the source of practice questions. One more thing is that I found there are lots of questions posted in prior years.
Should I download all of these historical practice questions? Or you are going to post the questions related to all sections in 2013 P2 notes going forward?

@Mark, thanks for the information. I will focus on these questions. Also did you try to practice all questions from prior years? Thanks a lot.