Exam Feedback FRM Part 2 (May 2015) Exam Feedback

[MK55]

I thought its was not cumulative default probabilities. I think I got 3k (5k - 2k). I got 5 defaults to reach 95%. Might be wrong though. :/

Were the number of defaults sequentially increasing with 2 and 3 defaults in the last 2 rows? I am not sure. May be if we add the prob associated with these 2 it comes out to be more than 5 % and if add just the last row it was less than 5%. Also, I got the explanation wrong in the previous post. Anyways I suppose am imagining different scenarios to defend the answer

 

[saran11]

What I did was add the probabilities of defaults from 0 to 5 i guess (p(0) + p(1) +P(2)...p(5)) till it reached 95% or close to it. and then removed the expected loss. Now, I am not sure if the probabilities were of distribution or it was directly given cumulative prob. :/

 

[MK55]

What I did was add the probabilities of defaults from 0 to 5 i guess (p(0) + p(1) +P(2)...p(5)) till it reached 95% or close to it. and then removed the expected loss. Now, I am not sure if the probabilities were of distribution or it was directly given cumulative prob. :/

Oh okay.. I think I have got some clarity now.
So you started from the top and kept adding the probabilities till you reached close to 95%. And since you reached 5 there were probably more than 5 as max number of defaults. So 5k -2k = 3k is correct if you reached slightly less than 95% and may be 3k -2k =1k is correct if you reached slightly greater than 95% when you reached 5 defaults (assuming before 5 there were 3 defaults). Anyways I should not get too obsessed with this question. Thanks

 

[JDGutzmann]

I agree with Saran11, had it wrong at first as well. The trick was not to count "backwards" but "forwards" from zero defaults up. The shown part of the distribution only amounted to ~97% if I remember correctly (max. number of defaults in the table was 6, while @ 100% confidence it should be 100 defaults)

 

[MK55]

The shown part of the distribution only amounted to ~97% if I remember correctly (max. number of defaults in the table was 6, while @ 100% confidence it should be 100 defaults)

Yes thats correct. Missed that part. Thats why i ended up with 3 defaults for cum prob slightly less than 95.
I have missed out on some scoring questions in the exam. Theory parts were quite tricky.

 

[saran11]

Any inputs on collateralised PFE graph. I marked Interest rate swap. but not sure.

 

[MK55]

Any inputs on collateralised PFE graph. I marked Interest rate swap. but not sure.

It think thats correct. It was originally peak shaped but got flattened at the top due to collateral

 

[cjwong19]

there was one question on the 3 lines of defenses, new product, ICORF, and review

 

[hamu4ok]

there was one question on the 3 lines of defenses, new product, ICORF, and review

As far as I remember by now, the answer was an independent review

 

[mary_ful]

I bear in my mind for your sharing, parts of questions I guessed were wrong, hereby sharing "bogey" about assets allocation & securities selection. In 2014 Nov. issued its concept and this May issues formula . I forgot this issues were calculated assets allocation or securities selection, just understnad assets allocation calculated as "(Wp-Wb)Rb , securities selection calculated as "(Rp-Rb)Wp. Good luck to us, hope God can take the side with me closely to pass . THANK YOU

 

[mary_ful]

there was one question on the 3 lines of defenses, new product, ICORF, and review

I remember the question asked for "3rd pillar of Basel ", the answer is independent review. As for ICORF is 2nd defense line

 

[Esbringa]

Third Pillar is about market transparency and disclosure, the question was about the third line of defense (Audit)

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Can someone help me with this questions?

-Threshold 10,000 Minimun transfer amount 2,500 and the exposure raising from 9,000 to 12,000. I' d say that the collateral pledge is zero but i'm not pretty sure at all

-That one about risk allocation

 

[hamu4ok]

Third Pillar is about market transparency and disclosure, the question was about the third line of defense (Audit)

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Can someone help me with this questions?

-Threshold 10,000 Minimun transfer amount 2,500 and the exposure raising from 9,000 to 12,000. I' d say that the collateral pledge is zero but i'm not pretty sure at all

-That one about risk allocation

The answer is zero colleteral transfer. The uncollateralized exposure rose from 9k to 12k, but the threshold is 10k. So 12k-10k=2k. However, there is the requirement of min. transfer of 2500. 2000-2500=-500. More than 500 is needed to enforrce the collateral call. The answer is zero.

 

[mary_ful]

I remember the question asked for "3rd pillar of Basel ", the answer is independent review. As for ICORF is 2nd defense line

Sorry for I typing error. correct is 3rd defense line to answer "independent review ", 2nd defense line is ICORF, 1st defense line is line manager.

 

[cjwong19]

there was one question on calculation of 95% LVAR. I am not sure if I did it correctly or not but I recall that my calculation is in between answer B and answer C. I am not sure if the question specifically asked for the best answer

 

[Esbringa]

there was one question on calculation of 95% LVAR. I am not sure if I did it correctly or not but I recall that my calculation is in between answer B and answer C. I am not sure if the question specifically asked for the best answer

The answer was exact, 49,500 if im not mistaken. Option b) on my exam

 

[cjwong19]

The answer was exact, 49,500 if im not mistaken. Option b) on my exam

I chose option B too, but I am pretty sure that I divided the LC by 2

 

[Kudzai]

Unfortunately don't agree with your answer
If you are to allocate $100 million VaR limit among 3 managers with UNCORRELATED portfolios, the VaR Limit on each manager should be
Sq root (VaR ^2 + VaR ^ 2 + VaR ^2 ) = 100
VaR Limit on each manager must be < 100

The question did not require the VaR allocation but the capital allocation!!

 

[Goldfish3]

I chose option B too, but I am pretty sure that I divided the LC by 2

I dont remember the exact answer but do remember that the question gave average spread and the current price was the midpoint. So (average spread/midpoint) x 0.5 is the liquidity charge In the constant spread approach.

 

[robin3301]

I dont remember the exact answer but do remember that the question gave average spread and the current price was the midpoint. So (average spread/midpoint) x 0.5 is the liquidity charge In the constant spread approach.

B: 43500
C: 49500