FRM May Part II
- Thread starter cwright
- Start date
monumonumental
Member
& there was one question on "buying junior tranch and selling equity on CDX"..where i marked my answer as "stress testing should hv been done"
This is my first time taking it, so I don't how it compares to prior part 2 exams. The people I spoke to after the exam at my exam site thought it was very difficult (clearly didn't use BT
) Personally I think I would agree though that it was moderate difficulty, although even with that said I'm not sure how I did since I prepared a lot more for quantitative questions and there wasn't that many of those. I didn't think the test was that bad, but I would have prepared differently (a lot more reading and in detail understanding of concepts than computation practice) if I had known the test was like this.
From my last chapter meeting I think I recall one of the GARP employees on the testing board saying they calibrate the test, as in remove some questions after seeing how everyone did on them for whatever reason as maybe the question wasn't fair or had an error. But I could be making that up to make myself feel better :\
Regardless...best of luck
Matt
If we're thinking of same question I think I also put stress testing correlations
I don't remember the specifics but those numbers ring a bell and I think I had the same answer
Sachin_Shanbhag
Member
voice0605 how did u arrive at 6000...for the var.
Sachin_Shanbhag
Member
For the age weight I marked7000 as the most recent value 2 day old was arpund 7000
monumonumental
Member
even i have taken FRM L 2 for the first time yesterday.I was quite under prepared as i did not use BT as i really never new about them when i started my preparation,but people are saying that the exam was moderate difficulty.Even i am not sure about whether i will pass or fail,but if i fail the culprit will be my "under preparation"and not difficulty of exam.This is my first time taking it, so I don't how it compares to prior part 2 exams. The people I spoke to after the exam at my exam site thought it was very difficult (clearly didn't use BT
Personally I think I would agree though that it was moderate difficulty, although even with that said I'm not sure how I did since I prepared a lot more for quantitative questions and there wasn't that many of those. I didn't think the test was that bad, but I would have prepared differently (a lot more reading and in detail understanding of concepts than computation practice) if I had known the test was like this.
From my last chapter meeting I think I recall one of the GARP employees on the testing board saying they calibrate the test, as in remove some questions after seeing how everyone did on them for whatever reason as maybe the question wasn't fair or had an error. But I could be making that up to make myself feel better :\
Regardless...best of luck
Matt
I
This is my first time taking it, so I don't how it compares to prior part 2 exams. The people I spoke to after the exam at my exam site thought it was very difficult (clearly didn't use BT
Personally I think I would agree though that it was moderate difficulty, although even with that said I'm not sure how I did since I prepared a lot more for quantitative questions and there wasn't that many of those. I didn't think the test was that bad, but I would have prepared differently (a lot more reading and in detail understanding of concepts than computation practice) if I had known the test was like this.
From my last chapter meeting I think I recall one of the GARP employees on the testing board saying they calibrate the test, as in remove some questions after seeing how everyone did on them for whatever reason as maybe the question wasn't fair or had an error. But I could be making that up to make myself feel better :\
Regardless...best of luck
Matt
I agree with Turner737, the exam was moderate difficult... I also like quantitative questions but the exam was so many qualitative questions.
There were some questions I still remembered included :
1. Syntetic risk free ( related with cds and Bond)
2. Frequency distribution in Ops Risk
3. implied volatility in equity ( Left tail and Right tail)
4. Related with definition of MBS
5. loss in Merger strategy
what do you think guys?
monumonumental
Member
brother i forgot what i chose for this particular question but i m sure i didnot choose "centralisied database"....as per my logic this question deals with ERM and in ERM its better to have decentralisation as it helps to delegate the risk duties throughout the firm.
Spronkworks
New Member
If I recall first 2 choices were same (long call & put at 1 yr/2yr maturity), but one was 808 strike and other 792... I chose 808 only because that's the forward at 1% rf-rate, and thus ATM. Why did you choose the 792?
Spronkworks
New Member
Perhaps, but a lot of confused faces staying to the end at my site...
monumonumental
Member
I thought value of option reduces when it approaches maturity,so price after 1 year will be 800*e-rt=792.
Spronkworks
New Member
Fair enough, I just reversed that saying K*e-rt = 800, K = 808... 2 sides of the coin, eh?
for the question about 25 loans, my answer is 60,000
portfolio value= 1,000,000
PD of each loan = 2%
Expected Loss = 1,000,000*2%=20,000
As each loan is independent, so # of default follows a binomial distribution.
Prob(0 default) = 25C0 * 0.98^25 * 0.02^0 = 0.603
Prob(1 default) = 25C1 * 0.98^24 * 0.02^1 = 0.308
Prob(2 default) = 25C2 * 0.98^23 * 0.02^2 = 0.075
Prob(0,1,2 default) = 0.987
value of each loan = 1,000,000/25 = 40,000
so the 95% VaR is 2 defaults which is 40,000*2 = 80,000
Unpected Loss = 80,000 - 20,000 = 60,000
When the number of loan become 50.
Expected Loss = 1,000,000*2%=20,000
Prob(0,1,2,3 default) = 0.982
value of each loan = 1,000,000/50 = 20,000
so the 95% VaR is 3 defaults which is 20,000*3 = 60,000
Unpected Loss = 60,000 - 20,000 = 40,000
Answer is EL unchange, UL decrease.
This question wasted me many time.
portfolio value= 1,000,000
PD of each loan = 2%
Expected Loss = 1,000,000*2%=20,000
As each loan is independent, so # of default follows a binomial distribution.
Prob(0 default) = 25C0 * 0.98^25 * 0.02^0 = 0.603
Prob(1 default) = 25C1 * 0.98^24 * 0.02^1 = 0.308
Prob(2 default) = 25C2 * 0.98^23 * 0.02^2 = 0.075
Prob(0,1,2 default) = 0.987
value of each loan = 1,000,000/25 = 40,000
so the 95% VaR is 2 defaults which is 40,000*2 = 80,000
Unpected Loss = 80,000 - 20,000 = 60,000
When the number of loan become 50.
Expected Loss = 1,000,000*2%=20,000
Prob(0,1,2,3 default) = 0.982
value of each loan = 1,000,000/50 = 20,000
so the 95% VaR is 3 defaults which is 20,000*3 = 60,000
Unpected Loss = 60,000 - 20,000 = 40,000
Answer is EL unchange, UL decrease.
This question wasted me many time.
I also choose 802 but the correct answer should be 792.
I find the answer on wiki http://en.wikipedia.org/wiki/Chooser_option
beta=0.6
so when m=-1, asset~N(-0.6,sqrt(1-o.6^2)) --> i.e. N(-0.6,0.8)
unconditional default point (with 5%) is -1.645
conditonal default point is (-1.645-(-0.6))/0.8 = -1.306
PD = 9.51 (the answer is slight different from this value but very close to it)
