Exam Feedback November 2017 Part 1 Exam Feedback

[Nicole Seaman]

We hope that everyone did well on the FRM Part 1 exam on Saturday! We would love to hear any feedback that you have about the exam. How did it go? Did you encounter unexpected questions? Thank you in advance for any feedback you can provide!

 

[George Dywili]

Hie.
The Exam was tough because of the time constraint I guessed about 10 questions. The BT questions are on point, all the questions in the exam were covered by the BT question sets in one form or another.
Looking back I thought the BT questions were taking it too far in terms of question difficulty, but now I see it was necessary. Thank you to the BT Team, pass or fail your services and products are on point.

 

[huzi]

found frm level 1 to b pretty straight forward... dint expect it to b so damn easy...

 

[ankitrautela@gmail.com]

Average difficulty but hard on time constraint. Questions were wordy and required the complete paragraph to be read to churn the required info.

Some questions that I remember

1. FRA simple with all rates given - i marked 27.5 M as answer
2. Swap easy but tricky qstn
3. 4 simple qstns on hedging - dv01, change in beta, rho and sigmas given and compute Beta
4 portofio duration and convexity
5 easy one margining
6 Ec = cm*ul
7 calculate el
8 calculate portfolio ul
9 open interest and volume
10 Fx hedge dont remember the qstn but answrs like 8.3, 10.3, 16.3
11 1 day 95 var to 10 days 99 var
12 find rho given ess and tss
13 monthly rate given and find annual rate
14 stock 45, trader believes price can either go 42 or 45 which strategy to use- butterfly, starngle
15 property of white noise
16 diff between r square and adj r square
17 cal stocks to hedge portfolio delta
18 find probability given poission distribution
19 long aud and which strategy will maximize profit when price rises - long aud call/ short aud put/ long future/ short future
20 diff between theough the cycle and in point


Will post more later.

Thanks

 

[huzi]

For 14, was it strangle?
For Variatin Margin question, what was the answer (5 tons of gold, Initial Mariin was some 33K odd)...
Also one question on Monte Carlo simulation sample used 500, if the confidence interval reduced from 16 - 24 with Mean 20 to 19-21 how much sample to be used?.... thnx alot mate.

 

[ankitrautela@gmail.com]

For 14, was it strangle?
For Variatin Margin question, what was the answer (5 tons of gold, Initial Mariin was some 33K odd)...
Also ome question on Monte Carlo simulation sample used 500, if the confidemce interval reduced from 16 - 24 with Mean 20 to 19-21 how much sample to be used?.... thnx alot mate.

For 14 i marked butterfly as strangle is applicable for large moves but here prices are range bound. Not sure though.
Don’t remember anawers for margin qstns
For simulation answer was 8000

Do you remember answer for swap, fra and gx hedge qstns?

 

[prsdmoh]

It is Strangle. Margin question ans is zero I think.. u felt it easy.. wow.

 

[oldfed]

My overall impression of FRM part 1 with no focus on question's content (do not remember enough material for the moment to give a good overview):

1 No need to insist on the fact that turtle did a relevant coverage of the material. I used other providers and, for instance, the mock turtle was the most representative in my opinion. GARP and other provider's mocks were too straight-forward compared to the real exam.
2 You have understood that I found the exam quite challenging. I would rather say I found it hard.
3 Especially, I found it more time-consuming than I expected. I will wait for feedbacks, but I had the following impression: Most of the longer questions were on the first half of the exam (maybe it's just a psychological bias), creating a "panic effect". I probably did not skip enough questions during the 2 first hours.
4 I have no preference between quantitative/qualitative questions but I found the last ones to be the more challenging. For me (and maybe only for me), there were few answers that were easy to eliminate quickly in qualitative questions.

Hope the best for everyone here

Oldfed

 

[flawless21]

I thought it was very challenging, but easier than the May 2017 exam. I skipped 10-12 in the first 50 questions because they involved more work/thought, however, by the time I was done with the exam, I was unable to spend enough time on those remaining questions so I had to guess

I also picked strangle for Q14. I think that's right. I don't think its butterfly because the position was only two legs, a call and a put. Isn't a butterfly 4 legs?

There was a question on mortality, should've studied that part, but I glossed over it quickly. The one step European put binomial tree was pretty easy (thanks David!)

I got a 3232 in May, and since i heard that is barely failing, I hope to do better this time around!

Did anyone get Q4???? It was the easiest question on the exam but I couldnt' get it for the life of me. It was when you had to figure out how any bushel contracts you had to hedge with. We had the portfolio value which was 4M, then you had the contract size and multiplier, so that was in the denominator. Then you were given the standard dev of the spot and future and correlation.. but i multipled the first part with (stand dev spot/stand dev future)*Correlation.. but could not get the answer!

Can I just add that when taking an exam, people need to be more responsible when checking in. The proctor's said multiple times to shut your phone off, but people kept leaving the sound on.. delaying the exam start date by 30 minutes. Same thing happened in May. Unfortunately, I saw some people dismissed as they didn't enter the room by 7:45AM.

Also, i was surprised by how many country risk questions that were asked! 2 or 3? Do you think the curve is more lenient for November exams?

 

[schumi_frm]

Other questions I remember:

- Calculate prob. of less than 2 exceedances given a certain VaR (binomial).
- Calculate prob. of 8 bonds defaulting out of a portfolio with 20 (binomial).
- Question on country risk. Someone remembers the answer?
- Question on penalty factors (SIC, AIC, etc). I think the answer was SIC, the one with biggest penalty.
- One question about warrants (had to use (N+m)/m ).
- Probability of bond defaulting within 2 years.
- Easy binomial tree question with 1 step.
- Qualitative questions about risk committee, CRO, Barings, LTCM, VaR and ES, Monte Carlo.
- No question on Greeks.

Also, I could not get any answer matching the questions on the UL or the probability of the bond going into default. Did the same happen to someone else?
Is it possible that none of the answers matched?

Good luck to everyone.

 

[ankitrautela@gmail.com]

Other questions I remember:

- Calculate prob. of less than 2 exceedances given a certain VaR (binomial).
- Calculate prob. of 8 bonds defaulting out of a portfolio with 20 (binomial).
- Question on country risk. Someone remembers the answer?
- Question on penalty factors (SIC, AIC, etc). I think the answer was SIC, the one with biggest penalty.
- One question about warrants (had to use (N+m)/m ).
- Probability of bond defaulting within 2 years.
- Easy binomial tree question with 1 step.
- Qualitative questions about risk committee, CRO, Barings, LTCM, VaR and ES, Monte Carlo.
- No question on Greeks.

Also, I could not get any answer matching the questions on the UL or the probability of the bond going into default. Did the same happen to someone else?
Is it possible that none of the answers matched?

Good luck to everyone.

For ul the answer was 78M i guess. Ul1=64, ul2=96 and rho =.45

Answer was matching for bond default.
For me none of the answers was mstching for a qstn on hedging portfolio delta.

 

[oldfed]

For 14, was it strangle?
For Variatin Margin question, what was the answer (5 tons of gold, Initial Mariin was some 33K odd)...
Also one question on Monte Carlo simulation sample used 500, if the confidence interval reduced from 16 - 24 with Mean 20 to 19-21 how much sample to be used?.... thnx alot mate.

In my distant memory and with caution, it was strangle because it implied to play on volatility (what other answers did not, butterfly for instance, and there was no straddle). Did not remember the MCS question but if you want to reduce by 4 your interval, all else equal (standard deviation and mean), you have to increase your sample by 4² in order to reduce standard error by 4 (so 8000 I suppose). Did not remember the exact answer for variation margin, but I did not found zero, the maintenance margin was "cut".

Regards

 

[kawal_frm]

I think it was strangle as it was written that sharp movement for less than 42 or more than 48.so max benefit will come with strangle; not butterfly.


Margin requirement question = 0


One easy question where my answer was none of options; finding lease rate. F = 1286;S= 1260;Rf = 3.1%,storage = .6%,conv yield= 1.6%.t = 1 year


Marked 7.3% as correct answer for bond defaulting in 2 years.


Marked 400 as answer for last bond convexity question where given convexity was 36.


Mortgage prepayment of ~2600 in month 14.


68M for Ul1=64, ul2=96 and rho =.45


delta hedging ques I think ~1800 shares...my answer matched


answered put for AUD question.


antithetic monte Carlo: x = x1+x2/2


marked 8.31 for cost of warrant


.40 for sharpe ratio question.


1.25 mean and .39 std dev for gbp usd exchange rate question.


simulation answer = 8000

 

[ankitrautela@gmail.com]

In my distant memory and with caution, it was strangle because it implied to play on volatility (what other answers did not, butterfly for instance, and there was no straddle). Did not remember the MCS question but if you want to reduce by 4 your interval, all else equal (standard deviation and mean), you have to increase your sample by 4² in order to reduce standard error by 4 (so 8000 I suppose). Did not remember the exact answer for variation margin, but I did not found zero, the maintenance margin was "cut".

Regards

Do you remember answer for swap, fra and fx hedge qstns?

 

[ankitrautela@gmail.com]

I think it was strangle as it was written that sharp movement for less than 42 or more than 48.so max benefit will come with strangle; not butterfly.


Margin requirement question = 0


One easy question where my answer was none of options; finding lease rate. F = 1286;S= 1260;Rf = 3.1%,storage = .6%,conv yield= 1.6%.t = 1 year


Marked 7.3% as correct answer for bond defaulting in 2 years.


Marked 400 as answer for last bond convexity question where given convexity was 36.


Mortgage prepayment of ~2600 in month 14.


68M for Ul1=64, ul2=96 and rho =.45


delta hedging ques I think ~1800 shares...my answer matched


answered put for AUD question.


antithetic monte Carlo: x = x1+x2/2


marked 8.31 for cost of warrant


.40 for sharpe ratio question.


1.25 mean and .39 std dev for gbp usd exchange rate question.


simulation answer = 8000

For lease i was unable to match answer later i used lease rate = discount - 1/t *ln f/s and answer matched

For 1.25 and .039 i marked sd as .035 do you remember the sample size?

Do you remember answer for swap, fra and gx hedge qstns?

 

[oldfed]

I think it was strangle as it was written that sharp movement for less than 42 or more than 48.so max benefit will come with strangle; not butterfly.


Margin requirement question = 0


One easy question where my answer was none of options; finding lease rate. F = 1286;S= 1260;Rf = 3.1%,storage = .6%,conv yield= 1.6%.t = 1 year


Marked 7.3% as correct answer for bond defaulting in 2 years.


Marked 400 as answer for last bond convexity question where given convexity was 36.


Mortgage prepayment of ~2600 in month 14.


68M for Ul1=64, ul2=96 and rho =.45


delta hedging ques I think ~1800 shares...my answer matched


answered put for AUD question.


antithetic monte Carlo: x = x1+x2/2


marked 8.31 for cost of warrant


.40 for sharpe ratio question.


1.25 mean and .39 std dev for gbp usd exchange rate question.


simulation answer = 8000

Thank you for all your infos. You've got all guys an impressive memory. As I do not rember numbers (like you do), I can only give a feedback on 2 things: For Margin requirement, I think there was some (units of measure were "misleading") and for antithetic, I did not choose the average because it did not diversify the new sample (I took the one where a -x1 were in the answer)

Regards

 

[kawal_frm]

i think 5 rows of data were there;so divide by 4(n-1 for sample).....fra 27.5M i think.....one currency question usd mxn rate of return...i think ~9.5% something.......

another question of choosing either stock A or B and then find min volatility: marked 8%

One theory question based on coherent measure of ES,var.

 

[oldfed]

Another question not quoted so far: Relative positions of spot/ forward/par curves

 

[oldfed]

Do you remember answer for swap, fra and fx hedge qstns?

Unfortunately, not remember the numbers. As I have "some moderate confidence" to get those rights => Maybe, if you give some numbers, it will recall me something. For fx, in my memory, there was at least 2q: a forward hedging of balance sheet's assets (I think that is what you mean by "fx hedge") and a forward currency computation with interest rate parity.

 

[oldfed]

3 more qualitative questions I have not seen quoted so far:
1 Internal credit ratings concerning through the cycle and at the point approaches
2 Difference between mutual/hedge funds
3 Which distribution to choose to capture movements beyond a threshold