Exam Feedback May 2019 Part 1 Exam Feedback

[VWJETTY]

In addition to the above, these are a couple of questions I recall:

1- A question related to Antithetic & Control variates; I marked Antithetic not sure if it's the correct answer though.

2- A question related to foreign exchange risk (CHF and euro denominated loans).

3- Banking & trading book.

4- Deriving spot rates from discount factors (if I remember correctly the answer was 2.01%)

5- determing if a strategy is a Bull or Bear spread (I suppose it was a Bear spread with a max of USD 15 and min of USD 2)

1. I did too. Not sure if it was right though.

2. Yeah, if i remember correctly, i think they lost money right? But yes, this question is very familiar.

3. Yes, I said like banking had a direct impact on the income statement whereas trading had an indirect one. Although I think it could be that the banking book could have less liquidity and the trading book have more liquidity but i didn't choose this because it's not always true.

4. Yeah, I think I guessed on this one. Not sure of answer.

5. It would depend on where the strike would be at.

 

[mariomansour]

1. I did too. Not sure if it was right though.

2. Yeah, if i remember correctly, i think they lost money right? But yes, this question is very familiar.

3. Yes, I said like banking had a direct impact on the income statement whereas trading had an indirect one. Although I think it could be that the banking book could have less liquidity and the trading book have more liquidity but i didn't choose this because it's not always true.

4. Yeah, I think I guessed on this one. Not sure of answer.

5. It would depend on where the strike would be at.

Regarding 3, I answered that the banking book is related to the loans, while the trading book is related to the assets and liabilities (I recall it was mentioned in the first reading "Banks" in FMP).

4- Im pretty positive that was the answer (it's what I got anyway after applying the z(t) formula)

 

[shantharam1]

In addition to the above, these are a couple of questions I recall:

1- A question related to Antithetic & Control variates; I marked Antithetic not sure if it's the correct answer though.

2- A question related to foreign exchange risk (CHF and euro denominated loans).

3- Banking & trading book.

4- Deriving spot rates from discount factors (if I remember correctly the answer was 2.01%)

5- determing if a strategy is a Bull or Bear spread (I suppose it was a Bear spread with a max of USD 15 and min of USD 2)

1) I went with Control Variate for that question as I remember the options given were about using the known variables.

 

[VWJETTY]

Regarding 3, I answered that the banking book is related to the loans, while the trading book is related to the assets and liabilities (I recall it was mentioned in the first reading "Banks" in FMP).

4- Im pretty positive that was the answer (it's what I got anyway after applying the z(t) formula)

I think this is probably right. I wasn't sure about this question at all really.

 

[kwenthieu]

1) I went with Control Variate for that question as I remember the options given were about using the known variables.

I also think it is clear that the answer was the "Control Variate" method.

 

[kwenthieu]

There was a very short question about normal distribution ,, mean and stad deviation given and asked to calculate mean return...I knew it is a very simple question but i couldn't solve it... anyone has idea?

Yes, we were given the expected annual return (mu) and volatility (sigma) of a stock, and asked to compute the mean return, with the assumption that the annual return is normally distributed.
I assumed the stock followed a lognormal process of BMS model, and used the formula :
mean return = mu - (1/2)*sigma^2

 

[kwenthieu]

I thought it should be > 0 though. The larger the number the faster the reversion is. I don't see any points of limiting b to <1.

Two questions from me -
1. Does anyone remember a question regarding Gaussian Copula? I have completely no idea on this.
2. There is a question regarding the best derivative strategy to apply VaR approach. Any input?

I also do not remember clearly the question regarding Gaussian Copula, but I'm very confident in my answer :
"the marginal distribution of each variable is mapped to the standard normal distribution"

 

[mariomansour]

I also do not remember clearly the question regarding Gaussian Copula, but I'm very confident in my answer :
"the marginal distribution of each variable is mapped to the standard normal distribution"

Yes that was most probably the correct answer, marked the same.

 

[david kim]

Yes, we were given the expected annual return (mu) and volatility (sigma) of a stock, and asked to compute the mean return, with the assumption that the annual return is normally distributed.
I assumed the stock followed a lognormal process of BMS model, and used the formula :
mean return = mu - (1/2)*sigma^2

That makes 11.5% right?
I think I chose C but Im not sure that is 11.5%
Do you remember which letter you chose?

 

[david kim]

I also do not remember clearly the question regarding Gaussian Copula, but I'm very confident in my answer :
"the marginal distribution of each variable is mapped to the standard normal distribution"

Hello!! hope we all pass this one!!!
There was a sentence that included "marginal distributuon"but I thought that wasnt the answer. I think it said marginal distribution would be stand' normal distribution or sth. The sentence that I chose to be correct said 'Random variables are mapped into stand' normal variable' I think the question described gaussian Copula with the term 'Variable'

 

[david kim]

Does anyone have any Idea on Key rate portfolio Volatility question? I think I solved it but I dont remember I got it right

 

[mariomansour]

I also think it is clear that the answer was the "Control Variate" method.

Didn't they mention anything about a complementary set in that particular question? Silly error from my part then.

 

[Coot]

Didn't they mention anything about a complementary set in that particular question? Silly error from my part then.

Can't remember the exact details but it mentioned a different instrument to which there was an analytical solution of I'm not mistaken.

 

[Coot]

Does anyone have any Idea on Key rate portfolio Volatility question? I think I solved it but I dont remember I got it right

I definitely got an answer. Can't be sure if it was correct.

 

[flex]

That makes 11.5% right?
I think I chose C but Im not sure that is 11.5%
Do you remember which letter you chose?

Can U remember 'sgm' value?

 

[liudewei]

There are too many qualitative questions and too few quantitative ones in this exam.I didn't finish them.,It's very pitiful.

 

[liudewei]

I recommend that you contact GARP to ask this question so you can get an accurate answer. They are the only ones who can answer questions about their policies and procedures. You can contact them at [email protected].

Nicole

Hi，teacher Nicole Seaman.I'm new here.It's a pleasure to meet all the teachers and good friends.

 

[kwenthieu]

That makes 11.5% right?
I think I chose C but Im not sure that is 11.5%
Do you remember which letter you chose?

Unfortunately, I do not remember the value and the letter I chose. But applying the formula gave one of the choices.

 

[kwenthieu]

There are too many qualitative questions and too few quantitative ones in this exam.I didn't finish them.,It's very pitiful.

I doo agree with you. There were surprisingly too many qualitative questions.

 

[kwenthieu]

I agree with detective for the most part.

Although I somehow got stuck on the poission calculation towards the end even though I knew the formula for it. And ended up guess it (educated guess I would like to think). But other than that I'm just gonna give a brain dump here.

ES given the historical returns and 99% confidence internval. I think N was 200. So I just took the average of the lowest and the second lowest return? Is that right?

What was the difference between FRA and interest rate swaps? I didn't really review FRA at all so I was in the water on that one.

A good amount of stress testing, governance, quanlitative stuff. Geezzz If I could only remember them now

Oh yes, there was one about a teacher, and teaching the interms about proper governance, I said that the speculative bet would expose them to foreign currency risk. That was actually my last question.

Agree on the SIC being the heaviest penalize

A bunch of plug & chug stuff including EL, UEL, Sharpe, Trynor, information ratio, find put delta given N(1), umm.....CAPM, CAPM assumptions, bionomial interest rate tree (1 period). Speaking of that, I almost forgot I had to discount it BACK to the PV. Because there was an answer for the undiscounted value. Sneaky sneaky.

About the question on the historical 99% ES : Maybe I got confused on this one. I thought we were given the ten worst losses (in descending order) in a table. To compute the ES, I took the average of the highest and second highest loss (so the first and second values in the given table).
Does anyone remember if we were given losses amounts or returns ?