Exam Feedback May 2017 Part 1 Exam Feedback

[Nicole Seaman]

Good luck to everyone who is taking the exam tomorrow!! It is always a pleasure supporting all of you, and we appreciate you spending your time preparing with us!

We would love to hear any feedback that you have after you have taken the exam. How did it go? Did you encounter unexpected questions? Thank you in advance for any feedback you can provide!

 

[yeoshuiming]

Just completed part 1, its challenging in terms of completing all 100 qns within 4 hours, where each qns are done with clear confidence and working e.g. 2qns on 2-steps bionomial American & European option valuation

Did guessed for a few questions which

GARP did a very goob job spreading out all the questions throughout all reading materials ! Reflected the proportion of marks allocation well! Thumbs up!

Saw questions from new topics such as:
- insurance benefit and contribution plans, breakeven premium.. on top of SMM CPR from MBS
- bank optimal risk appetite (BK 1: FRBNY Economic Policy Review) where it depends on business model i.e. AAA- better than AAA
- no qns on exotic options, besides tricky qns on convertibility of callable bonds (sample paper 2017 has ki + ko = regular)
- stress testing scenarios: what can a CRO recommend within his job scope and responsibility? which methods in stress testing are most appropriate when almost all looks like one along with ERM
(actually, if I recall correctly, many new questions from stress testing)

My view on the type of qns:
- very fundamental where concepts are broken in building blocks and pieced together in ways that's novel and test your concepts thoroughly... e.g. rates relationship with putable bonds (put + bond), put call parity options on bond
- tricky qns/or those that i though were challenging:
1) Fermi "guestimate" qns missing some input which requires guessing...
e.g. given par, guess spot, which is + few bp higher than par
2) Compounding/Discounting kind...
e.g. forwards is PV of FV of strike vs. futures is FV underlying, forwards, futures DV01, Beta hedging
e.g. replication of bond's cashflow for same TTM (3 Yr) bonds but different coupon (given 5% coupon, find mkt value of 3% coupon)
3) Hedging kind...
e.g. A-L qns with multiple currency exposure and appropriate rates hedging, of course, be mindful of which curr the company is receiving and what curr is asked for in the answer
4) FX scenario qns...
e.g. hedge with forward 1y1y, and given 1y spot and forward 2y1y, which numbers spot or forward to use...
5) volatility term structure where current instantaneous vol is higher than long term variance, so would a contango changed towards backwardation as VIX mean reverts to long term variance? Or remain contango, or flatten, or become a hump/butterfly? (
6) cost of carry: storage cost given in absolute term than yield
7) bank capital requirement: unexpected loss rather than unexpected loss volatility formula....
8) is barbell or bullet YTM higher or lower given rexpective bonds duration, yield, coupon, term
9) CCP: objective T/F qns on mechanics...
10) FRA valuation: (float - fixed rate) x (time...) x Notional
11) regression: finding beta coefficient and intercept from SSE, SSR?
12) probability: conditional...
13) GARCH correlation forecasting (not volatility.. so covariance (r1 x r2))... tricky with qns like correlation is wrong and updated so what happens to beta? Eh, proportional in CAPM except risk-free rate is there? And, assumptions of MA invertibility, wold's theorem, AR stationary cov...
14) CAPM: quite a few questions on finding highest sharpe ratio possible.. and assumptions like can stocks be shorted? unlimited financing capital?
e.g. given 2 stocks, where one is negatively correlation but lower return, and the other has higher return but zero correlation
16) appropriate statistics for testing: excess kurtosis vs kurtosis
17) calculating PD and need formula of poisson pdf given average rate
18) many tricky questions on volatility vs variance scaling and scaling on standard deviation.. same for continuously compounding on forward rates derivation from par/spot/d(t)
e.g. VaR confidence interval: given 1 day 99% VaR, whats 20 days 98% VaR?
19) gamma-vega-delta hedging.. need to inverse gamma-vega matrix and solve for inverse to know number of underlying shares (gamma, vega=0) to hedge last free variable delta
20) country risk with credit rating and GARP COC
21) Didn't encounter any CTD bonds, nor AI/dirty/clean price... Swaps were simply comparative adavantage.. no loss valuation on default midway OTC swap exposure
22) Not much on duration or convexity... But there were qns on multi-factor hedging where tricky part is using T-bond to hedge zero-coupon bonds (rather than the other way) and residual lower term rate exposure are hedged with a mismatched 2 yr for 5 yr.. so expecting overhedge with 30yr, and 5 yr to offset 2yr rate exposure...


Many more which I cannot really remember... Till now, i cannot give myself a confidence interval of how many qns I answered right

Many tricky qns... but also many simple, give away qns (duration, convexity, financial disaster (barring, metallgesellchaft), multifactor shocks)

I think I failed because many calculated answers didn't tally
Its challenging (time constraint is a big challenge!!! so if you think a qns would take a long time, skipped it! But you cannot skip all!

Cheers!
J.
Singapore

 

[jtankx90]

...

wow! amazing you still can remember so much.. my mind was blank the moment i left the place.

 

[surojitpalb]

same here. Questions were challenging enough. Not optimistic about the results but gained experience.

 

[yeoshuiming]

Anyone knows when results will be out? Read on the last page that it will be within the next 6 weeks time. But I doubt I can think about it that long.. I feel that I may not pass

 

[jtankx90]

Anyone knows when results will be out? Read on the last page that it will be within the next 6 weeks time. But I doubt I can think about it that long.. I feel that I may not pass

2016 May exam results came out in end of june.. if it helps (from the may 2016 part 1 thread)

 

[Stavut]

Exam was brutal.

Questions were very "quirky" formulated compared (even compare to the regular quirkiness of the frm questions) to practice exams, and practice questions.

Very few plug and chug questions. Less bounded and more use of Ewma, unexpected loss and as mentioned different means to obtain the sharpe ratio.

Lot less "standard" var, bonds and CAPM questions than expected. Very creative and a teaching experience.

 

[slacknoise]

First, thanks for your support here at Bionic Turtle. Even though i have serious doubts whether i will pass or not, this forum proved to be rock solid in gaining a quick understanding in otherwise rather abstract material. I really enjoyed studying with the interactive forum style and will probably also refer to the forum in the future. Also, i was impressed of how close the BT Quiz questions were to the real exam. Amazing fitting job.

I think the exam was quite manageable, but the amount of time i had to allocate in reading questions, sorting the numbers and figuring out the steps i need to do wrt. one question was sometimes too much. Personally I am very prone to commit operational errors in this context, so i sometimes had a good guess at the question to move on to other questions where i was sure to score. On a couple of questions, i even had the feeling, they could have been structured differently eg. less time consuming, but were not, as to put more time pressure on you.

I was missing some concepts which appear quite important to me for example copulas, EVT, WCDR, and contamination effects in abnormal market conditions.

Here my 2 cents on the exam:

Quite a few questions concerning EWMA, where i completely blacked out on the formula.
Some questions concerning unexpected losses, which i could master thanks to bionic turtle.
Scaling problems eg. transform 99% 1 day VaR to 95% 10d VaR given few inputs.
Variations of Future and Forward trade offs with cross hedges CNY, INR and GBP
Finding the highest sharpe ratio, given 2 stocks which are 0 or 1 correlated to the one stock currently in the portfolio.
Approx. 3 questions concerning Operational Risk, Audit, Stress Tests
Expected shortfall / comparison to VaR
Some conditioned BSM questions eg. shifts in parameters on outcome
Contango / Backwardation theory question in the context of storage cost

cheers

 

[zahra.saied]

One.. congratulations to all for completing this milestone! Exam is finally over.

Two.. as many said, time constraint was A HUGE issue. It was devastating reading the questions, knowing I can solve them but not having the time to solve them! I ended up guessing many questions - not even educational guess, merely guesses.

Low chances of passing but gained good experience for sure. Bionic turtle material helped a lot thought.

 

[1234567]

wow sounds like you guys had a hard exam!!
would love to hear some more about the questions so it will help people study for next exams

 

[estherchan]

To everyone that has finished the exams, I think it's really cool that you guys can remember the questions in such great details, but since it is still early morning in the US or Latin America, would this be unfair to those that have finished the exam?

 

[Shams]

To everyone that has finished the exams, I think it's really cool that you guys can remember the questions in such great details, but since it is still early morning in the US or Latin America, would this be unfair to those that have finished the exam?

I used to think that questions are different for different timezones(at least 4-5 different sets) but looks like thats not the case!

 

[vistag]

To everyone that has finished the exams, I think it's really cool that you guys can remember the questions in such great details, but since it is still early morning in the US or Latin America, would this be unfair to those that have finished the exam?

Completely agree
I am L2 giver,just glanced at this page and thought too much was given away when american,latin america timezones have not yet started the exam.

May be @Nicole Seaman can ensure that the the thread gets opened only after the last possible time zone exam has started in future. Otherwise it creates unfair advantage as it gives precious info to certain group of people

 

[surojitpalb]

I agree with @vistag.

 

[surojitpalb]

Just completed part 1, its challenging in terms of completing all 100 qns within 4 hours, where each qns are done with clear confidence and working e.g. 2qns on 2-steps bionomial American & European option valuation

Did guessed for a few questions which

GARP did a very goob job spreading out all the questions throughout all reading materials ! Reflected the proportion of marks allocation well! Thumbs up!

Saw questions from new topics such as:
- insurance benefit and contribution plans, breakeven premium.. on top of SMM CPR from MBS
- bank optimal risk appetite (BK 1: FRBNY Economic Policy Review) where it depends on business model i.e. AAA- better than AAA
- no qns on exotic options, besides tricky qns on convertibility of callable bonds (sample paper 2017 has ki + ko = regular)
- stress testing scenarios: what can a CRO recommend within his job scope and responsibility? which methods in stress testing are most appropriate when almost all looks like one along with ERM
(actually, if I recall correctly, many new questions from stress testing)

My view on the type of qns:
- very fundamental where concepts are broken in building blocks and pieced together in ways that's novel and test your concepts thoroughly... e.g. rates relationship with putable bonds (put + bond), put call parity options on bond
- tricky qns/or those that i though were challenging:
1) Fermi "guestimate" qns missing some input which requires guessing...
e.g. given par, guess spot, which is + few bp higher than par
2) Compounding/Discounting kind...
e.g. forwards is PV of FV of strike vs. futures is FV underlying, forwards, futures DV01, Beta hedging
e.g. replication of bond's cashflow for same TTM (3 Yr) bonds but different coupon (given 5% coupon, find mkt value of 3% coupon)
3) Hedging kind...
e.g. A-L qns with multiple currency exposure and appropriate rates hedging, of course, be mindful of which curr the company is receiving and what curr is asked for in the answer
4) FX scenario qns...
e.g. hedge with forward 1y1y, and given 1y spot and forward 2y1y, which numbers spot or forward to use...
5) volatility term structure where current instantaneous vol is higher than long term variance, so would a contango changed towards backwardation as VIX mean reverts to long term variance? Or remain contango, or flatten, or become a hump/butterfly? (
6) cost of carry: storage cost given in absolute term than yield
7) bank capital requirement: unexpected loss rather than unexpected loss volatility formula....
8) is barbell or bullet YTM higher or lower given rexpective bonds duration, yield, coupon, term
9) CCP: objective T/F qns on mechanics...
10) FRA valuation: (float - fixed rate) x (time...) x Notional
11) regression: finding beta coefficient and intercept from SSE, SSR?
12) probability: conditional...
13) GARCH correlation forecasting (not volatility.. so covariance (r1 x r2))... tricky with qns like correlation is wrong and updated so what happens to beta? Eh, proportional in CAPM except risk-free rate is there? And, assumptions of MA invertibility, wold's theorem, AR stationary cov...
14) CAPM: quite a few questions on finding highest sharpe ratio possible.. and assumptions like can stocks be shorted? unlimited financing capital?
e.g. given 2 stocks, where one is negatively correlation but lower return, and the other has higher return but zero correlation
16) appropriate statistics for testing: excess kurtosis vs kurtosis
17) calculating PD and need formula of poisson pdf given average rate
18) many tricky questions on volatility vs variance scaling and scaling on standard deviation.. same for continuously compounding on forward rates derivation from par/spot/d(t)
e.g. VaR confidence interval: given 1 day 99% VaR, whats 20 days 98% VaR?
19) gamma-vega-delta hedging.. need to inverse gamma-vega matrix and solve for inverse to know number of underlying shares (gamma, vega=0) to hedge last free variable delta
20) country risk with credit rating and GARP COC
21) Didn't encounter any CTD bonds, nor AI/dirty/clean price... Swaps were simply comparative adavantage.. no loss valuation on default midway OTC swap exposure
22) Not much on duration or convexity... But there were qns on multi-factor hedging where tricky part is using T-bond to hedge zero-coupon bonds (rather than the other way) and residual lower term rate exposure are hedged with a mismatched 2 yr for 5 yr.. so expecting overhedge with 30yr, and 5 yr to offset 2yr rate exposure...


Many more which I cannot really remember... Till now, i cannot give myself a confidence interval of how many qns I answered right

Many tricky qns... but also many simple, give away qns (duration, convexity, financial disaster (barring, metallgesellchaft), multifactor shocks)

I think I failed because many calculated answers didn't tally
Its challenging (time constraint is a big challenge!!! so if you think a qns would take a long time, skipped it! But you cannot skip all!

Cheers!
J.
Singapore

@yeoshuiming
U have given a lot of hard work to memorise the question paper and give an unfair advantage to candidates who have not taken the exam yet. U should know that any candidate's selection in this exam depends on the overall performance of all the candidates. So ur step has just took us to the backfoot.
It is not that u have commited a sin, but you should have waited for all to complete the exam first.

 

[David Harper CFA FRM]

@surojitpalb I temporarily hid (removed from public view) his post this morning, and then subsequently reverted the view ... it's okay to share now

 

[satyapriya2004]

It looked like 2017 May FRM Part 1 questions (numericals) were designed to test candidates' TI BA skills more than core fundamentals. I mean all this time you prepare to master the concepts and memorize every single formula just to witness that you are rendered helpless under time pressure because they have dramatically scaled up the calculations steps per question. Is GARP running out of creative ways to make questions smarter without resorting to increasing calculation steps ? One already feels like a cave man having to use a calculator in the present era, on top of that one has to be agile and accurate enough to meet GARP's ever increasing button pushing requirement. (I mean seriously , was it really necessary to test 2-step binomial valuation two times ?) Multiple times I felt, 2/3 questions are merged into 1 question. Just knowing the process is not enough anymore, you gotta embrace the mindless button pushing ritual too : the latter being a significant attribute of present day's Financial Risk Manager . Don't give me that whatever it is, it's same for everyone. No. Skilled candidates are forced to do dirty guessing work along with the Unskilled ones, thanks to your brutal intentions behind the question design. What do you think, what kinda of risk managers would come out of this ? I just hope they do not continue this madness and restore the elegance and dignity of the FRM Exam by designing questions in a TI BA agnostic fashion which are original and really test a candidate's worth.

 

[surojitpalb]

@surojitpalb I temporarily hid (removed from public view) his post this morning, and then subsequently reverted the view ... it's okay to share now

@David Harper CFA FRM thanks but i think damage has been already done. Anyways best of luck to all candidates. Now wait for results.

 

[irenestaal]

Am I the only one who feels the practice exam provided by GARP did not fully reflect the level of difficulty nor the level of detail of some of the exam questions?
Although a proportion was in line with the practice exam, I felt that about 30/40% was a LOT harder and needed significantly more time to answer.

Mixed feelings afterwards. Not sure if I got enough right to pass. Even though I scored quite high on the practice exams.

 

[bob fisher]

@David Harper CFA FRM thanks but i think damage has been already done. Anyways best of luck to all candidates. Now wait for results.

i ask myself if @yeoshiuming has broken the garp code of conduct hahah. i am L2 taker, also with us there where a few "whistleblowers" ( not that extreme as here but anyway), i dont know what the reason could be to tell questions to others bevor exam day is over for all (provideing assymetric information ..). this gives them an obvious advantage, just imagnime you knew a big part of the questions a few hours bevore the exam!!!