Exam Feedback FRM Part 2 (May 2014) Exam Feedback

[chouchouc]

thanks for your answer, well I don't know in Lebanon we were 10 registered for part 2 and only 8 came. So I'd say those who didn't come are those who were unprepared.

As a french leaving in Singapore, I can say that people here take this kind of exam very seriously and again part 1 was full, part 2 was 75% full i would say. Do they count them as "fail" or "no show" ?

 

[asdf]

No I don't think they are counted. I read once that the MPS was the average of the top 5% scores.

 

[Juan B.]

Hi, on the prob of default for two years, giving spread 325 bps and lgd 0.4, did you get 15%?

0.0325/0,4= 0.08125 so 1 - e exp -0.08125 * 2= 0.149984

 

[asdf]

hi Juan,

sounds right, I am not sure of the answer though

 

[Hope]

hi Abhinav, I solved the 95 cvar as follows, 1mm portfolio, 15 bonds, 5 pd, 0 RR:
Prob 0 defaults 0,95exp 15 = 0.463
Prob 1 default 15 * 0.95 exp 14 * 0.05 exp 1= 0.37
Prob 2 defaults 15*14/2*1 * 0.95 exp 13 * 0.05 exp 2 = 0.13

So to reach the 95 cvar we need 2 defaults, 100000/15 * 2= 133,333

I think somebody was also querying the hedge ratio, asset 100 gbp vol 0.3 which needs to be hedged shorting another asset with corr 0.6 and vol 0.2, so 100 * 0.6 * 0.3 /0.2 = 90

95 cvar = UL - EL

EL = 5%*1000000=50,000
UL = 2*1000000/15 =133,333

95 Cvar = 133,333-50.000=83,333

 

[Abhinav Agrawal]

That is correct, I used 3 defaults which is where I messedup. What about the backtesting question solution?

 

[Juan B.]

forgot de EL! thanks

 

[Juan B.]

For the backtesting i did, 0.99*252 + z * sqrt 0.99*0.01*252 = 8 and i got z 3.47
I hope i did not forget something again!

 

[Hope]

That is correct, I used 3 defaults which is where I messedup. What about the backtesting question solution?

If I was not wrong for Backtesting
with 8 exceptions in a 99% VAR model, if we use 99% confidence level

t = (8 - np)/sqrt (np*(1-p)
( 8 -252*0.01)/(sqrt(252*0.01*0.99))= 3.47 something

 

[chouchouc]

there was a question about a coherent scenario for a country that exports oil and gas
I select the answer that says "drop in oil price and increase in the currency"
because not only the oil price drop would hit them but also the increase in currency would hit their exportation
any thought ?

 

[ctoye]

Good Morning,

I'm sitting for P2 in Nov. Looking back at your P2 experience yesterday, how would you have changed the concentrations in your prep work? Would you have supplemented BT w/ more deep-dive into the GARP reads? In certain areas of the curriculum (ie Basel), you'd understandably have to cull your focus, but I'm interested in your thoughts on this.

In Nov 2013, I sat for L1. I did the GARP reads and used BT and I was very impressed by the way the BT question bank makes you keen to the curveballs on the exam.

 

[asdf]

on the one of the oil exporting country, there was a choice of falling oil prices and drop in equity markets, I chose this one but you have a point

 

[Juan B.]

I also choose dropping oil prices plus local ccy appreciated as they heavily relied on the exports so this would stress their revenue

 

[Hope]

Do you still remember a question about portfolio construction?

 

[chouchouc]

on the one of the oil exporting country, there was a choice of falling oil prices and drop in equity markets, I chose this one but you have a point

Do you still remember a question about portfolio construction?

the one with the Treynor ratio, Beta, correlation ? I chose Treynor ratio

 

[Juan B.]

Re portf construction it was asset a corr 0.9 with portfolio and vol 0.25 and return 0.25 and asset b corr 0.4 with vol 0.3 and return 0.2... I went for asset b ,less correlation with portfolio and answer asset b as treynor ratio is higher as the other was beta higher

 

[asdf]

i chose treynor ratio also, i dont think it can be anything but this answer, because a higher beta is not a good thing all else equal

 

[Juan B.]

guys, delta Asian option 5 days before expiring, 0, isn't it?

and increase in default correlation means increase of unexpected loss?

 

[Hope]

the one with the Treynor ratio, Beta, correlation ? I chose Treynor ratio

yes, I also chose Treynor ratio for this question.

How about Portfolio construction techniques, which one is correct?
a.Quadratic Prog...
b. Linear Pro...
c. Stratification...
d. Screen...

 

[Kush Sonigara]

I think I went for Quadratic..
Anyone on what to use ..MVAR(3 Option) CVAR(4th Option)?