FRM MAY PART 1 2013 Feedback

[Tabriz]

If you are given question on finance sphere you need some time to think about different relationships. Like, if interest rates or forward curve goes up what will happen. In garp exam if you know these types of relationship directly then you are done otherwise there is not any time for thinking.

 

[anand99]

While the quantitative part seemed to be fairly straightforward (due to BT's help needless to say), I was surprised with a large number of qualitative questions.. with quite ambiguous options.. i wish there'd been more calculations to be honest

I struggled with some quant questions too, but I agree with you. There were at least 25 or more qualitative questions on the exam. I went in underprepared for that number of questions. I was surprised on the amount of focus on data quality. There were at least 2-3 questions.

 

[Kush Sonigara]

Hey I think its 1-1/k^2....so anw would be 75%..which wasn't there...

 

[Kush Sonigara]

Floating rate note....I don't believe participating bonds and income bonds are guaranteed a portion of earnings and dividends surely aren't guaranteed.

Agree!!

 

[Kush Sonigara]

Guys something on risk universe?? I dont remember complete sentence but my anwer included "boundries"

 

[anand99]

Does anyone remember how they answered the probabilty question Bond A and Bond B prob of default is 4%. If Bond A defaults 80% prob that Bond B will default. I think choices were .90, .94, .96 and one in 80s.

 

[anand99]

Guys something on risk universe?? I dont remember complete sentence but my anwer included "boundries"

I went with option before boundaries option. I think it is "all risks that affect an organization or entity" or something along those lines.

 

[david7s17]

Does anyone remember how they answered the probabilty question Bond A and Bond B prob of default is 4%. If Bond A defaults 80% prob that Bond B will default. I think choices were .90, .94, .96 and one in 80s.

i chose 94%

 

[anand99]

i chose 94%

As did I

 

[anand99]

There was a question about portfolio volatility where individual volatilities of two instruments were 13.4 and 11.1 or something along those lines.

 

[SKnapp]

Tabriz,

Ugh, I bolded my responses, but it doesn't appear to be showing up as bold. Sorry

 

[SKnapp]

As did I

I choose 94% as well, but just because that looked the most reasonable. Any math to back up your answers?

 

[david7s17]

14. I don't remember Expected Shortfall question. I also read option strategies a lot but there was only one and even I don't know whether I wrote it right. Investor expects volatility could decrease. which strategy to choose ? Straddle, Short butterly, Short calendar, short bull or bear . Question was worded that manager's fund would experience large losses from drop in market volatility. So, I choose Butterfly (I think it was stated as long the wings, short the middle) which is a bet on lower volatility.

Is it long a butterfly?

 

[david7s17]

I choose 94% as well, but just because that looked the most reasonable. Any math to back up your answers?

P(B AND A) = =0.04
P(A |B) = P(B AND A) / P(A)
0.8 = 0.04 / p(A)
p(A) = 0.05 = p(B)
p(A OR B) = p(A) + P(B) - p(A AND B) = 0.06
SO NO DEFAULT = 0.94

 

[FRMVikram]

Company pays dividend to its common stockholders. But he expects revenue to go down . company could go bankrupt if he doesn't pay to the holders of ?
Floating rate note
Participating bond
Income bond
Common stockholders

Floating rate Notes

 

[FRMVikram]

Option has delta 0.6. You calculate delta normal and Monte Carlo VaR . which one has lower VaR ?

In my view Delta VaR will be lower as in MC we have additional factor of mu*(T2-T1)...

 

[MJ2013]

even I marked it as 10...but was not able to calculate it

 

[Tabriz]

14. I don't remember Expected Shortfall question. I also read option strategies a lot but there was only one and even I don't know whether I wrote it right. Investor expects volatility could decrease. which strategy to choose ? Straddle, Short butterly, Short calendar, short bull or bear . Question was worded that manager's fund would experience large losses from drop in market volatility. So, I choose Butterfly (I think it was stated as long the wings, short the middle) which is a bet on lower volatility.

Is it long a butterfly?

No, I think it was short butterfly. Straddle, Short butterfly, Short calendar, then short bull or bear spread (can't remember exactly last one). I choose last one. Short bull or bear spread. It was bull or bear not both

 

[Tabriz]

Did anyone solve futures daily settlements? So= 1500, 5 days. Answers contained 17500, 18000 . Initial margin 1700.

 

[Tabriz]

What was your answer for put call-parity. Spot = 50, strike 40. It should be american put option and american call option. Question asked to find lower and upper bound of difference of put and call option