Can’t recall the letter sorryOption A?
Can’t recall the letter sorryOption A?
14. Picked D as well, but wasn’t certainAny 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
You’re correctI think the question was stress loss, not stress EL, which is stress EL - EL..I at least hit one answer possibility doing this
friction between arranger and originator is a predatory borrowing and lending problem. (it on the pre study Garp question)14: I think it was friction between originator and assigner. I chose adverse as originator has more knowledge on the mortgager than the assigner
Choice C: default correlation of the originator (Bank xxx) of the mortgage and the CDO protection (CDS) seller increase.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
Got D, 15.xx% for the first oneAnyone recall the problem about a portfolio of assets starting at 120 with a decreasing number of assets surviving?
Also there was a question about a firm's asset value being close to the level of senior debt (firm also had equity and mezzanine debt).
Yeah that sounds familiarGot D, 15.xx% for the first one
For the second question there was some mention of the firm having an equal chance of failure or being acquiredAnyone recall the problem about a portfolio of assets starting at 120 with a decreasing number of assets surviving?
Also there was a question about a firm's asset value being close to the level of senior debt (firm also had equity and mezzanine debt).
first one, I remember the question was asking "time-weighted discrete default rate", which I calculated using geometric average and get the answer D.Anyone recall the problem about a portfolio of assets starting at 120 with a decreasing number of assets surviving?
Also there was a question about a firm's asset value being close to the level of senior debt (firm also had equity and mezzanine debt).
Yes I also got D for the first question.first one, I remember the question was asking "time-weighted discrete default rate", which I calculated using geometric average and get the answer D.
The second one, is the question saying someone observed the market volatility is increasing, and asking the direction (increase/decrease) of senior debt, mezzanine debt and equity's value?
I actually think it was asset volatility. But I assumed because there was a potential acquisition it would give the equity upsideYes I also got D for the first question.
And that does sound like the premise of the question for the second question.
I remember when the firm is not doing very wellI actually think it was asset volatility. But I assumed because there was a potential acquisition it would give the equity upside
oops..silly mistake then ;(Choice C: default correlation of the originator (Bank xxx) of the mortgage and the CDO protection (CDS) seller increase.
I think the originator has nothing to do with the CDO here, as it already transferred the credit risk to the SPV. It would be the default correlation between the underwriter of the CDO and the protection seller that matters. So I chose B as my answer.
I also went with equity and subordinate increases...C or DI remember when the firm is not doing very well
Mezzanine would have the same property as equity
Which both will go up in value in financial distress, while senior debt will fall in value
You are correct, I got that wrong lolfriction between arranger and originator is a predatory borrowing and lending problem. (it on the pre study Garp question)
Yeah time weight average default rate, got like 15,39%.first one, I remember the question was asking "time-weighted discrete default rate", which I calculated using geometric average and get the answer D.
The second one, is the question saying someone observed the market volatility is increasing, and asking the direction (increase/decrease) of senior debt, mezzanine debt and equity's value?
same here, mezzanine behaved like equityI remember when the firm is not doing very well
Mezzanine would have the same property as equity
Which both will go up in value in financial distress, while senior debt will fall in value
Originator and arranger. The arranger (issuer) purchases the loans from the originators for the purpose of resale through securitized products. The arranger will perform due diligence but still operates at an information disadvantage to the originator. That is, the originator has superior knowledge about the borrower (adverse selection problem). In addition, the originator may falsify or stretch the bounds of the application resulting in larger than optimal lending (predatory lending or predatory borrowing).You are correct, I got that wrong lol
I got your thinking and that’s how I proceed, but GARP practice exercisesOriginator and arranger. The arranger (issuer) purchases the loans from the originators for the purpose of resale through securitized products. The arranger will perform due diligence but still operates at an information disadvantage to the originator. That is, the originator has superior knowledge about the borrower (adverse selection problem). In addition, the originator may falsify or stretch the bounds of the application resulting in larger than optimal lending (predatory lending or predatory borrowing).
So both? Lol
On the other side, the only answer that said “the arranger should perform due diligence on the originator” was the adverse selection choice I believe; anyone recall?Originator and arranger. The arranger (issuer) purchases the loans from the originators for the purpose of resale through securitized products. The arranger will perform due diligence but still operates at an information disadvantage to the originator. That is, the originator has superior knowledge about the borrower (adverse selection problem). In addition, the originator may falsify or stretch the bounds of the application resulting in larger than optimal lending (predatory lending or predatory borrowing).
So both? Lol