Exam Feedback November 2015 Part 1 FRM Exam Feedback

[Kangaroo79]

Hi Moey,

Your welcome. Before taking the exam, I promised I would try to remember as much as possible and share it on the bionicturtle forum in order for other "would be" candidates to have an idea of what to expect, exactly they way I benefited from others sharing their impressions and questions they remembered.

As for the question on IR & Sharpe ratios: I first calculated the Information ratio and only two of the funds had a ratio higher than 35% (required minimum). I calculated the Sharpe ratio only for these two, so I cannot say that that fund had the highest level for both ratios.

I could have sworn it was a minimum Sharpe Ratio and to find the best IR...
Also, I believe the second fund had the highest IR given a min 35% SR.

 

[S666]

I could have sworn it was a minimum Sharpe Ratio and to find the best IR...
Also, I believe the second fund had the highest IR given a min 35% SR.

Yeah I thought this too...I remember it being best IR subject to minimum Sharpe Ratio of 0.35....and my answer was the second fund...

 

[S666]

Then i see S666 and the legion of people ripping the forums apart which confirmed my fears

Hey my friend, please don't take my ramblings as any kind of negative confirmation on your performance! I havn't received my score yet so it is more than possible that I may be wrong on a few things....have hope, and keep your fingers crossed! I'll keep my fingers crossed for you also!

 

[vistag]

Thanks ma

Hey my friend, please don't take my ramblings as any kind of negative confirmation on your performance! I havn't received my score yet so it is more than possible that I may be wrong on a few things....have hope, and keep your fingers crossed! I'll keep my fingers crossed for you also!

Thanks mate. I ve known u from couple of other forums too. Ur preparation and clarity in concepts was top notch. Infact each time i read ur posts i used to get kicked out of complacency in preparation.

 

[vistag]

Thanks all [re sharpe clarification] - another incorrect easy one. :/

How about the futures open interest question? Think the question was 100 open long, 50 open short, and 50 close sell - what's the volume [change] (100 or 0) and open interest (either 0, 50, 100)? I answered 100/50.

I agree with ur answer on 100 volume and 50 open interest. If there is any other view for anyone else let us know

 

[vistag]

I had a mix feeling about the questions..I felt first 50 questions were difficult but later on it was on par level... i felt qualitative questions were difficult ..They were not straight forward at all.....Secondly there were few questions i wasnt able to solve 1. OLS Last question of calculation 2. Then Var of delta and Gamma Neutral...As some people above said it was zero but how can VAR Be Zero 3 Another VAR Question where we were given Call option value along with stock and strike price ( i dont know which value to use to find the answer the call option or stock price )... 4 Another American Put option question with dividend given ( do we need to add the value of dividend to find ans as put value increases with dividend announcement )......Do let me know ur thoughts

For american option v need to add dividend as it increases put value(i don remember whether a risk free rate is given in this question or was it even required. Jus remember the option i solved was found in the options which can go either ways)

On the VAR part, we calculate on call if we have purchased a call. We calculate on stock as base if we sold one. I don remember this question.Hope you are not referring on delta var questions which are generally started with standard deviation from stock price

Any other views are appreciated.

 

[Kangaroo79]

Anyone else get a really small answer on the last one? Something like .00002

 

[bil8]

With the first creteria of 0.35 minimum, i rejected Fund A and Fund D because of lower sharpe ratio. Then out of Fund B& C, It was C with the highest IR Ratio for me...However between Fund B and C , Fund B had the highest sharpe ratio...This is what i remember

 

[bil8]

VAR question was regarding with 2500 Call options purchased and Call value was around 9 per option..At the same time, Stock price and exercise price were also given which got me confused ....I was getting answer with both call option Value which i calculated Like this "Call Option Value (9)*No of Call (2500)*Confidence Interval (1.645)*SD*(I dont remember it)....I got answer around 450....However there was another option which was also in the option if you calculate it with stock price............................Secondly does anyone remember the last OLS Question where we were given value for (x-XBar)(y-Ybar) etc

 

[bil8]

i also applied extrapolation technique and i got value of RM =6% AND RF=3% and then applied given beta and answer was around 6.7% and neareast ans was 7% so i selected it...

 

[vistag]

VAR question was regarding with 2500 Call options purchased and Call value was around 9 per option..At the same time, Stock price and exercise price were also given which got me confused ....I was getting answer with both call option Value which i calculated Like this "Call Option Value (9)*No of Call (2500)*Confidence Interval (1.645)*SD*(I dont remember it)....I got answer around 450....However there was another option which was also in the option if you calculate it with stock price............................Secondly does anyone remember the last OLS Question where we were given value for (x-XBar)(y-Ybar) etc

The option 1 using call options value is the way to go according to me, since when a call is purchased the var is limited to the value of call option value

Is the ols question on Y dependent on X? For that they asked bo and b1 values? Its calculaing the value using interecept and the slope right. Or is it a different one

 

[bil8]

yes it was the last question but there was only single value in all options ..i mean there were no values for bo and b1 individually...BTW do you remember the answer and do you remember the answer for covariance question in which table was given..i wasnt able to solve it

 

[vistag]

yes it was the last question but there was only single value in all options ..i mean there were no values for bo and b1 individually...BTW do you remember the answer and do you remember the answer for covariance question in which table was given..i wasnt able to solve it

I still doubt if we both are referring to the same question. I don remember the answers , but this is how i wd have gone(or went) about it.
First assume X=0 and then calculate Y value for b0. Use the slope methodology to calculate b1. Then put b0 and b1 into equation and caluculate Y value for a certain X

 

[spinonthings]

hi..can anyone throw light on the answers to these questions:
1. which is a covariance stationary time series......i answered the first part...time series is constant which autocorrelations zero after a finite dispalcement pi
2. which is true regarding history of corporate bond..i answered that AA rated bond has higher yield as compared to A bond over LONG TERM.

 

[MSharky]

Hi all,

I found the exam a bit lengthy, but fair. Was able to complete 50-60 confidently but for the remaining ones, I say I had to guess.

The Sharpe ratio question seemed straightforward, but for some reason, I kind of ran out of time on that question and never had time to finish it.

 

[Numerical Wizard]

@spinonthings
Regarding the question on requirements which have to be fulfilled for a series to be covariance stationary besides a stable mean and a stable covariance structure, it is also required that the autocovariance at displacement 0 is finite.

hi..can anyone throw light on the answers to these questions:
1. which is a covariance stationary time series......i answered the first part...time series is constant which autocorrelations zero after a finite dispalcement pi
2. which is true regarding history of corporate bond..i answered that AA rated bond has higher yield as compared to A bond over LONG TERM.

 

[Moey]

2. which is true regarding history of corporate bond..i answered that AA rated bond has higher yield as compared to A bond over LONG TERM.

Forgot which answer I selected but a AA rated bond should have a lower yield than an A bond (because it's safer). I see your emphasis on LONG TERM but the yield relationship is the same, or at most equal if it includes expected defaults into the pricing.

 

[spinonthings]

@spinonthings
Regarding the question on requirements which have to be fulfilled for a series to be covariance stationary besides a stable mean and a stable covariance structure, it is also required that the autocovariance at displacement 0 is finite.

Thanks....wording wrong but got d answer right

 

[spinonthings]

Forgot which answer I selected but a AA rated bond should have a lower yield than an A bond (because it's safer). I see your emphasis on LONG TERM but the yield relationship is the same, or at most equal if it includes expected defaults into the pricing.

Yeah..i know at hindsight now...but d lack of time did me...no issues

 

[spinonthings]

Attempted 93...expect to get 75 -80 right with a wcs of 70...hope it gets me through...4 years into job n no touch with academics...reasonably ok i assume