Exam Feedback May 2018 Part 2 Exam Feedback

[emilioalzamora1]

Hi @oldfed,

Material stays the same for one calendar year. It will always be amended before May per calendar year.

Hope this helps.

 

[kiufrm]

hope someone can help clarify my understanding of VaR.

to find 10 days VaR of portfolio, do I find VaR of portfolio then find 10-day VaR or do I find 10-day VaR of individual assets and get 10-day VaR of portfolio?

thank you in advance.

 

[terrance00232]

hope someone can help clarify my understanding of VaR.

to find 10 days VaR of portfolio, do I find VaR of portfolio then find 10-day VaR or do I find 10-day VaR of individual assets and get 10-day VaR of portfolio?

thank you in advance.

I remember that practice exams have similar questions and the method might be the first one. To calculate the 1-day portfolio VaR first and convert it to 10-day portfolio VaR.

 

[Bernardo]

I remember that practice exams have similar questions and the method might be the first one. To calculate the 1-day portfolio VaR first and convert it to 10-day portfolio VaR.

For normal parametric VaR, the two approaches are equivalent. For lognormal (also parametric) VaR, I would apply the square root law on the vol.

 

[Bilal Ehsan]

For normal Parametirc Var, both methods will result in the same values. However for Log Normal its different. I remember there was question in the paper asking for calculating 10 Day Var through Log Normal method. We were given annual values. 1. I tried to calculate annual Var and convert it into 10 days by Dividing by Sqrt250 * Sqrt10 but i didnt get the answer.2 I converted annual values to daily one and calculate one day var and convert into 10 days by Multiplying by Sqrt10....I got the answer.

 

[oldfed]

For normal Parametirc Var, both methods will result in the same values. However for Log Normal its different. I remember there was question in the paper asking for calculating 10 Day Var through Log Normal method. We were given annual values. 1. I tried to calculate annual Var and convert it into 10 days by Dividing by Sqrt250 * Sqrt10 but i didnt get the answer.2 I converted annual values to daily one and calculate one day var and convert into 10 days by Multiplying by Sqrt10....I got the answer.[/QUO

Hi bilal, Terrance, Kiufrm, Bernardo

I struggled with that one too but for another reason! ;-)

For your issue, I agree with Bernardo. In my opinion, for the order of computation, when facing a lognormal VaR, which is non-linear function [With a computation of e(kx) different from ke(x)], you always have to scale the volatility inside the function and in that case you get a 10d VaR directly by adjusting volatility in the function [dividing annual volatility by SQRT (250) / SQRT (10) = SQRT (25) = 5].

However, my problem, when facing a single Lognormal VaR in a question (no comparison with Normal VaR, just one Lognormal VaR to compute) is the use of the mean. I know, that in GARP papers, computation of a single Normal VaR always ignores the mean of the distribution. But in the case of a single Lognormal VaR computation, I have to admit that I still do not have the answer! I did not look for it enough in fact ;-).

And good future week-end to everyone.

 

[Karim_B]

Hi bilal, Terrance, Kiufrm, Bernardo

I struggled with that one too but for another reason! ;-)

For your issue, I agree with Bernardo. In my opinion, for the order of computation, when facing a lognormal VaR, which is non-linear function [With a computation of e(kx) different from ke(x)], you always have to scale the volatility inside the function and in that case you get a 10d VaR directly by adjusting volatility in the function [dividing annual volatility by SQRT (250) / SQRT (10) = SQRT (25) = 5].

However, my problem, when facing a single Lognormal VaR in a question (no comparison with Normal VaR, just one Lognormal VaR to compute) is the use of the mean. I know, that in GARP papers, computation of a single Normal VaR always ignores the mean of the distribution. But in the case of a single Lognormal VaR computation, I have to admit that I still do not have the answer! I did not look for it enough in fact ;-).

And good future week-end to everyone.

Hi @oldfed
One of the Schweser guys mentioned the following rules in terms of the GARP FRM questions and the use of the mean in VaR calculations:

1) For Lognormal VaR always use the mean.

2) For Normal VaR don't use the mean unless it's one of the following scenarios:
a) Comparing Normal VaR to Lognormal VaR
b) Calculating Surplus at Risk

Let's see what @David Harper CFA FRM thinks when he's back from content planning duty.

Best
Karim

 

[oldfed]

Hi @oldfed
One of the Schweser guys mentioned the following rules in terms of the GARP FRM questions and the use of the mean in VaR calculations:

1) For Lognormal VaR always use the mean.

2) For Normal VaR don't use the mean unless it's one of the following scenarios:
a) Comparing Normal VaR to Lognormal VaR
b) Calculating Surplus at Risk

Let's see what @David Harper CFA FRM thinks when he's back from content planning duty.

Best
Karim

Ok! Thank you very much Karim.

You're right, let's wait for feedback.

Have a good week-end

 

[kaval]

Hi bilal, Terrance, Kiufrm, Bernardo

I struggled with that one too but for another reason! ;-)

For your issue, I agree with Bernardo. In my opinion, for the order of computation, when facing a lognormal VaR, which is non-linear function [With a computation of e(kx) different from ke(x)], you always have to scale the volatility inside the function and in that case you get a 10d VaR directly by adjusting volatility in the function [dividing annual volatility by SQRT (250) / SQRT (10) = SQRT (25) = 5].

However, my problem, when facing a single Lognormal VaR in a question (no comparison with Normal VaR, just one Lognormal VaR to compute) is the use of the mean. I know, that in GARP papers, computation of a single Normal VaR always ignores the mean of the distribution. But in the case of a single Lognormal VaR computation, I have to admit that I still do not have the answer! I did not look for it enough in fact ;-).

And good future week-end to everyone.

..........................................................................................

I differ with this. and agree with Bilal. first, we need to find one day var by calculating one-day volatility. which is annual vol/ 250 (not divided by sqrt of 250) and then calculate 10day var by this formula: one day var * Sqrt(10)/Sqrt(250). i got the ans.

thanks
Kaval

 

[kaval]

guys what's the message you are getting if you try to sign in on the registration page? r we all getting the same message or there is a difference

 

[antogiar]

guys what's the message you are getting if you try to sign in on the registration page? r we all getting the same message or there is a difference

What the message you have?

 

[Bilal Ehsan]

Can you share the screenshot of your msg

 

[kaval]

it's the same, somehow I entered the ERP registration page. so relax. I know next few days are going to be restless. let's see what's there in future.

 

[kaval]

by the way, the message was "There are no exams available to register for. Please check back soon".

 

[terrance00232]

by the way, the message was "There are no exams available to register for. Please check back soon".

Hi, Kaval. I don't really understand what this message means.
Is it possible that anyone else will get different messages from the registration page?

 

[geotheox]

Mine states that "You will need to pass the FRM Exam Part II by May 2021. Otherwise you will have to re-enroll in the FRM Program as a new candidate."

 

[JK12]

mine states that I need to provide evidence of 2 years work experience by 2021 ...

 

[antogiar]

mine states that I need to provide evidence of 2 years work experience by 2021 ...

Did you pass the exam in May?

 

[emilioalzamora1]

If he did not he would not be in the part II forum .

 

[Edelio]

mine states that I need to provide evidence of 2 years work experience by 2021 ...

Would you mind to post a screenshot of the message you’ve got? Thanks.