Exam Feedback May 2021 Part 2 Exam Feedback

[VegaHedge]

Oh i have just calculated stress ELs for the answer
Which is simply Ead*stressed PD*LGD, didn’t subtract this from normal EL
But i have no idea how to do this question anyway, I just used the above method since I could not think of another one

I think the question was stress loss, not stress EL, which is stress EL - EL..I at least hit one answer possibility doing this

 

[VegaHedge]

I agree with all the above comments on that it was predominately qualitative....

There was one question that took up half the page and was lots of blah blah between investments in several different products. It then went on to say that the investor made two additional transactions, a correlation swap and something else I believe.

I spent so much time trying to understand the question that I left it till the end. Then time was short and I just read the answers and one correct one that stood out was that if the realised correlation was greater than the fixed the investor would gain. I ticked that one. TBH not sure if it was the right one but at least the payoff was correct.

Dave

This questions was the most hilarious one, the huge question text had nothing to do with the answer possibilities at all, except for the last sentence of the question, where they stated which trades had been entered ..I also picked the corr swap answer..

 

[badbunny]

This questions was the most hilarious one, the huge question text had nothing to do with the answer possibilities at all, except for the last sentence of the question, where they stated which trades had been entered ..I also picked the corr swap answer..

Also picked correlation swap

 

[mariomansour]

Q9 I performed as you, we could get the correlation among them since we have the EL under normal conditions but if taken that correlation assumption to get Stress Loss the answers did not match any of the given ones. So the Stress Loss is just EL - ELs. ELs just taking PDs.

yeah it was clustering, AML.

Yeah I think i did the same, was the answer 1.xx?

 

[badbunny]

Yeah I think i did the same, was the answer 1.xx?

Can’t recall the exact number sorry haha

 

[VegaHedge]

Oh i have just calculated stress ELs for the answer
Which is simply Ead*stressed PD*LGD, didn’t subtract this from normal EL
But i have no idea how to do this question anyway, I just used the above method since I could not think of another one

Also I think, not only PD was stressed, but also the EAD/EPE..so there were two stress components..can anyone recall?

 

[ratboy]

Also I think, not only PD was stressed, but also the EAD/EPE..so there were two stress components..can anyone recall

I think it was just PD but could be wrong

 

[badbunny]

I think it was just PD but could be wrong

Correct, was just stressed PD since it was a loan portfolio.

 

[VegaHedge]

Correct, was just stressed PD since it was a loan portfolio.

You mean both were given, but we were supposed to only take stress PD? Or only stress PD was given?

 

[Toucan]

I can certainly empathize with your stance. However because Covid forced most companies to go to a full remote working situation, BCP/DR/Ops risk is top of mind of most risk practicioners today (certainly at risk committees we're talking about it endlessly these days) and plus with markets melting upwards a lot... the market risk side seems like its the "dull" one relatively speaking! Odd times indeed and definitely odd to make a test around just the recent events... the test I think was trying too hard to be relevant and forgot to bring it back to the fundamentals (that we all crammed for) lol... just my two cents!

I get your point. But to me it was an exam fit for the PRM not the FRM.

 

[badbunny]

You mean both were given, but we were supposed to only take stress PD? Or only stress PD was given?

Only stress PD was given

 

[Ullaskarkera]

This questions was the most hilarious one, the huge question text had nothing to do with the answer possibilities at all, except for the last sentence of the question, where they stated which trades had been entered ..I also picked the corr swap answer..

Intial picked up B, Correlation swap as answer.
Then after reading C , Value of cds goes down with increase of correlation. Went with C , with some doubt in mind. Just thinking they didnt mention the direction of correlation swap

 

[Ullaskarkera]

Can’t recall the exact number sorry haha

Was this the question with 2 row table..stressed and normal pd was given?

I went with C ..1.9 or 1.7....had subracted stressed value from normal

 

[ajajaja12345]

Also I think, not only PD was stressed, but also the EAD/EPE..so there were two stress components..can anyone recall?

wait there was EAD/EPE? I recall I was trying to find EAD as it is a loan but I couldnt find EaD neither EPE I just saw PFE, stressed PD , normal PD and LGD as long as I remember.

 

[badbunny]

Was this the question with 2 row table..stressed and normal pd was given?

I went with C ..1.9 or 1.7....had subracted stressed value from normal

Yeah correct that table! You got it alright

 

[ratboy]

Was this the question with 2 row table..stressed and normal pd was given?

I went with C ..1.9 or 1.7....had subracted stressed value from normal

me too, subtracted stress from normal

 

[Ullaskarkera]

Any feedback on below?

12 : BCVA question ...ans D ? -5K something ? - - > i subtracted the DVA from CVA as i recall, answer was 1,000 something - not sure if right.


14 : some predatory trading , model risk , moral hazard question , was A or D the answer ? guess i selected A --> the frictions question? Not sure if it was adverse selection

15 UL component , correlation was given and total portfolio split as 16K and 24K , guess i selected 131 as answer

 

[badbunny]

Any feedback on below?

12 : BCVA question ...ans D ? -5K something ? - - > i subtracted the DVA from CVA as i recall, answer was 1,000 something - not sure if right.


14 : some predatory trading , model risk , moral hazard question , was A or D the answer ? guess i selected A --> the frictions question? Not sure if it was adverse selection

15 UL component , correlation was given and total portfolio split as 16K and 24K , guess i selected 131 as answer

I recall 14. It was adverse selection.

 

[ratboy]

14: I think it was friction between originator and assigner. I chose adverse as originator has more knowledge on the mortgager than the assigner

 

[Ullaskarkera]

I recall 14. It was adverse selection.

Option A?