Exam Feedback FRM Part 2 (November 2014) Exam Feedback
monumonumental
Member
lol.....for convertible arbitrage the answer will be liquidity premium.......and other one will be that analyst will face problem since they will have to manage asset composition in the balance sheet..
Does any body recall the question calculating a VAR & ES for combined portfolios, A & B @ 95 % . Portfolio A has VAR and ES of $1000 &$500, Portfolio B has VAR & ES of 750 & (forgot the value ).I don't recall the full question, how did you calculated, what was your answer.
Answer options for VAR was
A.1500
B.1500
C.2000
D.2500
Answer options for VAR was
A.1500
B.1500
C.2000
D.2500
thanks to everybody....if someone can recall more questions... please reply... I think that I am so strongly disappointed....I have learned a lot...and at the end.... some questions were just concentrated on few topics.... anyway good luck to everybody....if someone passes the results will be available on 29 th of December or 30th..if not in the beginning of new year....
I rechecked even restriction on assets level 2 on HQLA (<40%) and cash inflow to cash outflow (<75%), LCR =123% anyway.
monumonumental
Member
Just remembered 2 more questions:
Excess return/mvar1=excess return2/mvar2...is optimim,,
Undiversified Var is the upper bound..
So we have close to 65 questions with us in this thread..now we can easily estimate our scores..
Excess return/mvar1=excess return2/mvar2...is optimim,,
Undiversified Var is the upper bound..
So we have close to 65 questions with us in this thread..now we can easily estimate our scores..
monumonumental
Member
i picked d same answer as urs.,.
Ank
Member
I choose credit for this Q
The paper was extremely difficult. What GARP seems to have done is to place the entire weight of the 80 mark exam on every topic that has gone untested in the last few years and on newly introduced chapters as well.
Without exaggeration,.....the topics covered in GARP's sample exams over the last 5 years and end of the book questions barely received around 10 - 15 % of the exam weight (if not lesser).
My sentiments as well.
Without exaggeration,.....the topics covered in GARP's sample exams over the last 5 years and end of the book questions barely received around 10 - 15 % of the exam weight (if not lesser).
My sentiments as well.
LittleTurtle
New Member
I'm also disappointed about the number of questions on current issues...
Only 2 ... and quite simple.
If I have to take the exam again... I will have a very superficial reading on it ...
Only 2 ... and quite simple.
If I have to take the exam again... I will have a very superficial reading on it ...
Roshan Ramdas
Active Member
Agree....should be firmwide.
Roshan Ramdas
Active Member
Convertible arbitrage - Liquidity premium
Stress testing - I chose the option with respect to "asset mix"
Roshan Ramdas
Active Member
My approach to this question was more around eliminating the wrong answers and trying to zero in on the right one......to me, the points around bootstrap coming with more volatility in results etc etc,...were points that are relevant for the "basic HS". The bootstrap is essentially an exercise of averaging the VAR and ES estimates based on a large number of samples and I could not relate aspects such as volatilty / outliers to the bootstrap.
There is a note on Page 34 para 2 (GARP Market Risk), which seems to indicate 2 points with regards to age weighted HS -
a) an appropriate choice of the lambda parameter makes VAR(or ES) estimates more responsive to large loss observations.
b) age weighted VAR is better at handling clusters of large losses.
to continuedI selected the followingsi will disclose as much as i can remember)
1) variance swaps are easy to price. Do not remember what I selected, randomly guessed
2)We use internal data for body and distributions to model tail in measuring of loss severity. I chose internal for body, and external for tail (the logic is that extreme losses might have not been experienced internally, but externally there is a lot more chance of encounting such extreme losses)
3)Cvar came to be 8000. Same answer here UL=28000 EL=20000
4)Leverage ratio was around 2.94%. My leverage was > 3%, since I took tier-1 capital and divided by exposure.
5)73% was LCR - My answer - 123% (Level 1 + Level 2A/ (Cash out - Cash In)]. As remember Level 2A was already discounted (after haircut applied)
6)The Var for HW was higher than HS by 3.8..something for 1 day horizon. Randomly guessed, as completely forgot how to calculate HW stuff
7)RAF should be forward looking and include risk appetite. Same here, obvious answer
8)PO strips have more duration than passthrough from which they are created. Don't agree, PO strips should have the same duration or less (since there is no interest received) than for pass-through. I selected other answer.
9)I think there was a question on cash account/principal account with mbs/corporate bond..i think i selected that negative convexity of MBS is offset by positive convexity of corporate bond. Same answer here selected, should be correct.
10)There was a question on CLN.I think answer was that CLN has a CDS with protection seller paying upfront or something like that. Simple question with obvious answer.
11)A question on asset allocation where portfolio outperformed the benchmark due to asset allocation. I selected due to industry selection.
12)A question on trade repository where i selected that they are to protect unsophisticated investors from cheating. I believe the answer was to defer unsofistictad investor from investing (no cheating) I selected the other answer - regulators could monitor concentrations of OTC derivatives.
13)A question on transaction liquidity where i selected the 1st option. Do not remember Q nor A.
14)A question on WWR where i selected that OTM puts have higher WWR if purchased from oil producer. Same answer here.
15)Differnce between current and past market risk charges including SVAR/VAR i think the answer was 320. Same answer, it should be equal to SVaR charge.
16)Araroc where project should be rejected., - The same here
17)A question on minimum intrest for Raraoc where i selected 5%. Took much time for me, solved a soficticated equation, but answer came no close to the answers given, so I don't remember what i did next
18)Graph of IO strip..i think it should be D as interst component decreases over time. I chose B, as it should be declining but not so dramaticaly as in D, steadily.
19)A question where we had to use montecarlo to value MBS.
20)Diff between OAS/NS/ZS.
21)a question on EL where i think the answer was 60.
22)A question on tranches where the money paid to equity tranch was 0. Same here, if principal investment in equity was zero, then interest paid to equity is zero
23)Hedge fund has high sharpe ratio than DJSI index.
24)Q stat was significant for a fund hence there was liquidity risk and perhaps data smoothing was done. Return smoothing is what I remember I selected as well
25)A question on versik model where i selected that they use long term value of short term interest rates.
26)A question on convertible bond arbitrage..where it selected liquidity permium as a source of return.
27)Ban on naked SCDS will induce iliquidity and less price information. Same here.
28)PFE for Int swap with unequal payments.
29)A question on CRA where i think the answer was economic return on collateral.
30)Few questions on CSA where stronger party will want one CSA ......
31)A question where answer would be weighted avg of betas.
32)A question on model calibration risk where wrong model was used to value derivatives..ie delta normal was used.
33)A question on volatality smrik kind of diagram where delta was greater than .5.
34)A question on long/short equity..
35)Housing market is procyclical so extra protection are required by banks during economic downturns.
36)SAR decreases with decreasing interest rates.
37)Declining transaction cost impacts dispersion.
38)A question on performance attribution.
39)A question on LDA where it was told that lognormal should be used for severity always as per basels and i thought it was false..as basel never says to use lognormal for severity...
40)A question on holee model..i am not sure about the answer.
41)risky debt=rf-put
42)finding var usiing BRW or hybrid..i can't remember but the answer was 6.8 something.
43)AMA wants scenario analysis to be included to model capital ..
44)A easy question on finding the RWA.
45)Solvency vs Basel..i think i got it correct.
46)question on ir/trenor/sharpe..
47)A question on netting where the answer should be payment netting between for wards.
48)A question where the answer would be buying of SCDS to protect against soverign risk.
49)A question where answer will be that changes in reference rate may impact monetary policy beyond boundaries or something like that...
50)As default corre;ation increases VAR from senior tranches will increase dramatically as tail risk will increase..
51)Question on backtesting where answer seems to be 35.
52)Lock in period of 18 for hedge fund will cause harm.
53)Where you don't need to rely on qualitative aspects only??1)Consumer 2)Financial 3)Non financial 4)Soverign...i think it is Consumer..
54)Why do we need trade repositories..i think i selected to prevent unsophisticated investors..but now i think the answer should be to reduce concentrations.. = allow regulator monitor concentration
55)
.I think it was which has biggest intrest rate risk or something and i selected MBS and certificates of deposit..
56)Ya got it MBS2 YC 2...I they had biggest difference between nominal and zspread.
YC2 had steeper slope so more differnce between Z spread and Nominal spread.
57)quantile standard errors - I selected asymmetric confidence intervals
58)facts pertaining to bootstrap, age weighted & volatility weighted HS
59)The analyst may face problem to model balancesheet composition..
I knew the holee model question and few other but did silly mistakes on them due to time constraint and confusing wordings presented by GARP/
thats all i can remember for now...over all i think the paper was tough....i was unable to understand most questions and had to make educated guesses most of the time.
I had a very different answer from the all the posts that I have seen here on LCR question.
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650
LCR = 650/770= 84.41~85% which was one of the options which i chose.
My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.
Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123%
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650
LCR = 650/770= 84.41~85% which was one of the options which i chose.
My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.
Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123%
JacquesBBB
New Member
I think your mistake is : Level 2 / (level 1 + Level 2 ) must be less than 40% , ans not Level 2 / level 1.I had a very different answer from the all the posts that I have seen here on LCR question.
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650
LCR = 650/770= 84.41~85% which was one of the options which i chose.
My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.
Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123%
In this question , no ajustments were nececessarry in the numerator nor in the denominator
Roshan Ramdas
Active Member
Per observation made by @JacquesBBB, Level 2A is supposed to be 40% of total HQLAI had a very different answer from the all the posts that I have seen here on LCR question.
I worked it out like this - Level1 assets - 550 Leve2A - 250. But the restriction on Level 2A assets is - max (40% of level1) so that restricts the level 2A assets to 550*0.4=220.
Total eligible assets = 770
Outflow = 1100
Inflow = 450 (Which is less than 75% of the outlflow so the entire inflow can be included)
Net outflow = 650
LCR = 650/770= 84.41~85% which was one of the options which i chose.
My take on the haircut - The HQLA should be net of haircut which is taken from the repo markets to which the bank can pledge the asset and raise the liquidity.
My take on minimum LCR - Sure BASEL III says that it should be minimum 100% but the question asked to calculate the LCR for this particular entity and not about the basic minimum requirement.
Can anybody help out with this reasoning?? Where did I go wrong? Everybody here seems to agree that the answer was either 73% or 123%
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