Exam Feedback May 2018 Part 1 Exam Feedback

[krystynkatt]

Wasn't there only one answer with 6.5 and 6.55? I chose answer A.

FRA...can't remember answer but I got something that was a match.

Not sure if there was only one answer tbh, its most likely I chose A too, but dont remember exactly

 

[Albertikos]

other one that you have to determine de correlation with ess and tss I think. the trick was to do de sqrt of that...same?

 

[ab88]

For monte carlo, i chose 8000, and for lumber i got 6.5 and 6.55 and that one model predicted better than the other or something similar
I remember i forgot fra valuation formula and finally took some guesses, anyone remembers their answer? I chose something around 57k

57500 for FRA, you sure about Monte Carlo 8000?
Also, other one wasa Gauss n copula or t copula? can't remember the question I marked gaussian copula?

 

[nikic]

yes right lower aplha, but why smaller sample size?
for barbell i marked 14.xx
guess ccp answer is wrong for me

There was question asking effect of beta and volatility on ratios? remember that?
I think Gold margin answer was -2000. initial margin was 32000, maintenance was 24000 and first day loss 54000, so intital margin of 32000 falls below maintenance 24000 hence margin account value is -22000. Correct me if wrong, followed GARP book example. Variation margin here seems to be 46000?

One was on increasing/dereasing Monte Carlo Simulations, n-500,1000,2000,4000?
One was adjusted Rsq can be negative
What was the answer for lumber , two factor model was given and it was deterministic, what was the aswer for that 6.5 and 6.55% thats it?

i have listed around 70 questions..most of them discussed here.

- For the beta/volatility question on Treynor/Sharpe/Sortino/Alpha...I chose Treynor.

- Based on the numbers for the margin question, which are all correct as you listed them out, the variation margin is 32,000 + 22,000 = 54,000. The thing is it doesn't make sense for the account value to be -22,000 on DAY TWO, since if the variation margin is not posted, there would be a margin call. I don't think it's that complicated. But yes I did put -22,000 initially and then changed it to 54,000 variation margin on second thoughts.

- The one on the number of simulations required to improve the confidence interval, I chose 8000. Wasn't it 2000 as the given value then it was half, quarter, double, quadruple as the answers.

- For the multifactor model, I chose 6.5 and 6.55. Only one answer had both these values. I chose A.

- Yes, one question about adjusted Rsquare. Sadly I came home and checked and got it wrong. Answer is as you point out Adjusted Rsquare can be negative.

 

[nikic]

other one that you have to determine de correlation with ess and tss I think. the trick was to do de sqrt of that...same?

Wasn't ESS and SSR given in the question? It's a bit hazy. I remember Explained Sum of Squares, and the other being Sum of Sq of Residuals. Don't think TSS (total sum of squared) was provided. Then it's just plug and play.

 

[Albertikos]

Wasn't ESS and SSR given in the question? It's a bit hazy. I remember Explained Sum of Squares, and the other being Sum of Sq of Residuals. Don't think TSS (total sum of squared) was provided. Then it's just plug and play.

ahhhh yes..... ess and residuals were given... You have to do ess/(tss) and the result do the sqrt

 

[Albertikos]

57500 for FRA, you sure about Monte Carlo 8000?
Also, other one wasa Gauss n copula or t copula? can't remember the question I marked gaussian copula?

Me too... Gaussian Copula

 

[ab88]

- For the beta/volatility question on Treynor/Sharpe/Sortino/Alpha...I chose Treynor.

- Based on the numbers for the margin question, which are all correct as you listed them out, the variation margin is 32,000 + 22,000 = 54,000. The thing is it doesn't make sense for the account value to be -22,000 on DAY TWO, since if the variation margin is not posted, there would be a margin call. I don't think it's that complicated. But yes I did put -22,000 initially and then changed it to 54,000 variation margin on second thoughts.

- The one on the number of simulations required to improve the confidence interval, I chose 8000. Wasn't it 2000 as the given value then it was half, quarter, double, quadruple as the answers.

- For the multifactor model, I chose 6.5 and 6.55. Only one answer had both these values. I chose A.

- Yes, one question about adjusted Rsquare. Sadly I came home and checked and got it wrong. Answer is as you point out Adjusted Rsquare can be negative.

i explicitly remember, treynor option said that increasing beta will reduce treynor, one said increasing beta will increase jenson, dont remembr sharpe but it probably was about increasing volatility and decreasing sharpe. Sortino made some sense so i marked that. Dont know exactly.

yes you are right, my mistake, thankfully i also amrked 54k.

So it was 8000 for sure?

I also marked A for Lumber, but given was a deterministic model..so had some reservation but with aucity of time had to mark it

sadly I also got Rsq wrong.

 

[nikic]

Yep that one is definitely Gaussian Copula.

Another question I asked previously on Quants but didn't get an answer to was the question asking to find the Covariance and Std Deviation of returns.

For Std Deviation, the choices were 0.03 and 0.04. For covariance it was 0.0011 and 0.0016.

I chose 0.04 and 0.0016 as my answer.

The confusion here is, whether to treat this as a sample or population? Cause in both the covariance and std deviation formula, the divisor is N if it is population, and N - 1 if it is a sample.

Anyone knows this for sure? What did you do?

 

[ab88]

ahhhh yes..... ess and residuals were given... You have to do ess/(tss) and the result do the sqrt

Tha question asked for correlation, using Rsquare from ESS and Tss and taking sq root gave answer

 

[nikic]

i explicitly remember, treynor option said that increasing beta will reduce treynor, one said increasing beta will increase jenson, dont remembr sharpe but it probably was about increasing volatility and decreasing sharpe. Sortino made some sense so i marked that. Dont know exactly.

yes you are right, my mistake, thankfully i also amrked 54k.

So it was 8000 for sure?

I also marked A for Lumber, but given was a deterministic model..so had some reservation but with aucity of time had to mark it

sadly I also got Rsq wrong.

LOL I'd definitely never have picked Treynor option if it said "increasing Beta" along with it. It's so obvious that Treynor falls. That's not a mistake I'd make.

Still if the way you're describing it is exactly as how it appeared in the paper...then well I'm SOL. But I don't believe I'd have made such a mistake.

 

[ab88]

Yep that one is definitely Gaussian Copula.

Another question I asked previously on Quants but didn't get an answer to was the question asking to find the Covariance and Std Deviation of returns.

For Std Deviation, the choices were 0.03 and 0.04. For covariance it was 0.0011 and 0.0016.

I chose 0.04 and 0.0016 as my answer.

The confusion here is, whether to treat this as a sample or population? Cause in both the covariance and std deviation formula, the divisor is N if it is population, and N - 1 if it is a sample.

Anyone knows this for sure? What did you do?

I dont remember what i marked but i think it was sample so used n-1

 

[ab88]

LOL I'd definitely never have picked Treynor option if it said "increasing Beta" along with it. It's so obvious that Treynor falls. That's not a mistake I'd make.

Still if the way you're describing it is exactly as how it appeared in the paper...then well I'm SOL. But I don't believe I'd have made such a mistake.

Perhaps I got confused. But i easily eliminated Treynor. Lets hope for best.

 

[nikic]

Does anyone remember a theory question about spot/fwd rates?

There was a currency question involving Mexican Peso and that the foreign denominated currency portfolio suffered 3.3% loss p.a. Since the duration was 6 months I took (1-0.033/2) * foreign currency portfolio * exchange rate, and compared this final position to the initial valuation and got the answer. It was something like +4mil or +6mil.

Also another question (theory/qualitative) where the answer choice I selected was that a bond portfolio that experiences defaults can outperform treasuries.

And one question on operational risk. First two answer selections talked about the basic indicator approach. I chose one of the basic indicator answers...in my case it was B. Can't recall the exact one, but where the multiplier was based on the gross income etc of the business units. Was this correct?

 

[ab88]

Does anyone remember a theory question about spot/fwd rates?

There was a currency question involving Mexican Peso and that the foreign denominated currency portfolio suffered 3.3% loss p.a. Since the duration was 6 months I took (1-0.033/2) * foreign currency portfolio * exchange rate, and compared this final position to the initial valuation and got the answer. It was something like +4mil or +6mil.

Also another question (theory/qualitative) where the answer choice I selected was that a bond portfolio that experiences defaults can outperform treasuries.

And one question on operational risk. First two answer selections talked about the basic indicator approach. I chose one of the basic indicator answers...in my case it was B. Can't recall the exact one, but where the multiplier was based on the gross income etc of the business units. Was this correct?

Yes it was right. Convert at t , find value after 3.3%/2 loss , convert back at spot at t+1. got matching answer.
Dotn remember other two

 

[Albertikos]

Does anyone remember a theory question about spot/fwd rates?

There was a currency question involving Mexican Peso and that the foreign denominated currency portfolio suffered 3.3% loss p.a. Since the duration was 6 months I took (1-0.033/2) * foreign currency portfolio * exchange rate, and compared this final position to the initial valuation and got the answer. It was something like +4mil or +6mil.

Also another question (theory/qualitative) where the answer choice I selected was that a bond portfolio that experiences defaults can outperform treasuries.

And one question on operational risk. First two answer selections talked about the basic indicator approach. I chose one of the basic indicator answers...in my case it was B. Can't recall the exact one, but where the multiplier was based on the gross income etc of the business units. Was this correct?

Don´t remember the two first.... the third one i agree with you!

 

[Stuart D Moncrieff]

Tha question asked for correlation, using Rsquare from ESS and Tss and taking sq root gave answer

I think the ESS and SSR were given as 448 and 252 -> TSS = 700. Answer C was 0.64 which is the fraction of 448 and 700, taking the square root got you answer D. 0.8.

I hope. I have a worrying feeling I did SSR over TSS and the correct answer was 0.6...

 

[ab88]

I think the ESS and SSR were given as 448 and 252 -> TSS = 700. Answer C was 0.64 which is the fraction of 448 and 700, taking the square root got you answer D. 0.8.

I hope. I have a worrying feeling I did SSR over TSS and the correct answer was 0.6...

sqrt(700-448/700) =0.6. I remember now got this answer

 

[Albertikos]

sqrt(700-448/700) =0.6. I remember now got this answer

Don´t remember exactly the result... but i did if ESS is 448 and SSR 252... (448)/(252+448). Then sqrt of that and matches with one of the answers.

 

[Stuart D Moncrieff]

Don´t remember exactly the result... but i did if ESS is 448 and SSR 252... (448)/(252+448). Then sqrt of that and matches with one of the answers.

Yeh I just reversed engineered the ESS and SSR from remembering the 0.8 answer and a 700 denominator.