PFA a 5 page doc which is a snapshot on- Brush up- Expected concepts / formulae /common errors / general tips / one liners for FRM Level 1. Would be useful both for the existing test takers and also for those who are planning to take in May 14. Had uploaded the same on 14 Nov on a diff site but it seems that site is more suitable for CFA discussions. This one seems appropriate for FRM discussions . All the best. Ur valuable feedback and suggestions for improvement/inclusion is welcome so that we all and prospective first time test takers benefit.
Nov 2013 FRM Level 1 feedback
- Thread starter Maiyaa
- Start date
On question 66 it said that the analyst expects markets to decline and wants to close his positions immediately. When market declines I agree, stop loss is the preferred option, but here the question was which order is required to close the positions immediately and the answer should be market order, since (1) stop loss will not close the position immediately and (2) He expects market to fall in all probability and so he wants to close it ASAP. So it does not make sense to wait till stop loss and lose further. So close the position at market order.
Sabit Rahimov
Member
Stop loss order also allow to investor to close his position at the the certain threshold reached. let say if market index falls by 10% on stock index futures, then as per stop loss order given, the broker will initiate this order immediately. Basically, the purpose is to prevent further loss on position and percentage of stop loss order is defined by investor initially. Hope that, stop loss order is correct answer!
Thank you.
Sabit Rahimov
Member
If I'm not wrong question asked that in order to prevent further loss which one of the following order is most appropriate for the investor.
NO stop loss is not correct
The question explicitly asked which option would have allowed the investor to liquidate the position "quickly"
Stop loss is an order that is executed only once a certain threshold is touched and can potentially not be executed while here the investor wants to sell "quickly" as stated in the question
Market order is the correct solution
The question explicitly asked which option would have allowed the investor to liquidate the position "quickly"
Stop loss is an order that is executed only once a certain threshold is touched and can potentially not be executed while here the investor wants to sell "quickly" as stated in the question
Market order is the correct solution
in any case a cut off score of more than 60% seems highly unlikely. pl remember 50% is the pass rate.Hi @babyik
So what's your take on the cut-off if not 50-55%. My guess is 55-65% (big range) since the numerical part was relatively average but qualitative questions accuracy is definitely not going to be high on an average. The confusion among options is visible in the 131 comments above
KR
Uzi
i dont remember any such question. though there was a question on which of the following can BSM cannot value [ discussed above and in excel sheet]
Sabit Rahimov
Member
Which of the following is the feature of LIBOR
Sabit Rahimov
Member
I have tagged the final option which stated that "Libor quotes in five major currecies". Other alternatives I didnt really remember. At that time, I considered this option to be true.
yes thats right but I also remember that there was a question on the assumptions for BSM or for another method, I am not sure, so I thought that someone could have helped me on that
For the rest yes I had seen the question you refer to as well, thank you
yes I also opted for the solution that stated that LIBOR rates can be expressed for different currencies (I do not remember whether they explicitly stated five currencies, anyway more than one for sure)
Thank you
Sabit Rahimov
Member
Originally (in 1986) LIBOR was published for 3 currencies: the US dollar, the pound sterling and the Japanese yen. Over the years that followed the number of LIBOR currencies grew to a maximum of 16. A number of these currencies merged into the euro in 2000. At the moment we have LIBOR rates in the following 5 currencies : USD LIBOR, GBP LIBOR, EUR LIBOR, JPY LIBOR, CHF LIBOR
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Sabit Rahimov
Member
In addition to above comments, please also note that in april of current year, British Bankers Association made a number of amendments in regard to quotation of LIBOR. So as per amendment implied, now British Banker Association quoting only in 5 currencies and 7 maturities instead of 10 currencies and 15 maturities.
If you still have a doubt, please look at the recent LIBOR quoted currencies. You will see 5 currencies indicated above comment!
Thank you!
Sabit Rahimov
Member
Yes, I also saw such arguments in J.Hull chapters. In fact, these two choices were confusing! I'm not confident that I have marked the answer in respect to Libor quotation in major currencies. But more likely, I think I have marked the final one.
Regarding the proxy advantage of overnight swap index over Libor, recently some investors and analytics considered or argued it to be as proxy especially during the recent crisis. So, as a whole OIS is not recognized to be as proxy. As a consequence, LIBOR is widely used proxy for valuation and pricing.
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