Exam Feedback November 2017 Part 1 Exam Feedback

[prsdmoh]

One question on upper bound.. can't rem if it's call or put

 

[prsdmoh]

Garp code of conduct on rating downgrade

 

[sk7]

Hi,
I found the exam to be of moderate difficulty. Definitely seemed doable (read passable) but I found myself struggling with time towards the end, so just took random guesses in the last 6 questions. Also for some others in between. But I did find questions towards the end more Challenging, and not to forget so verbose. You had to read the full sentences to understand it well. Definitely a drag on anyways limited time we have for the exam
BT definitely helped with my preparation so kudos to David and team for their study material, irrespective of the outcome.
Coming back to the exam, I am now curious as to how the cut off goes. Can't say much about myself as I feel more like a 60 than a 90 score. Can't say if that's enough or not.

 

[prsdmoh]

Finding volatility given up and downward movement of 26..22 s Th.. binomial prob

 

[kawal_frm]

Finding volatility given up and downward movement of 26..22 s Th.. binomial prob

i think volatility answer was 26%
another question of loss freq and severity: poisson and lognormal

 

[prsdmoh]

A probability question on model ans. 32.5 I guess.. similarly one on bull mkt normal mkt 15%.. Hedge fund vs. Mutual fund- investment policy disclosure.. longetivity bond - Hedging against annuity risk.. Insurance premium 957 or?? Hyp testing question.. ans. Do not reject Null hyp..

 

[prsdmoh]

I am also expecting around 60.. how about others??

 

[sk7]

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

I felt the same.. Lost here

 

[schumi_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

I got 8.31 for the warrant, 400 for the bond question given the convexity. For the antithetic I chose however 1-x1 as oldfed.

Other questions I remember:

- Marked 212.000 for the profit in the options strategy (278000 minus the cost of the option (68000).
- Question on YTM (zero-coupon vs coupon bond).

 

[prsdmoh]

Another on Open interest 360 & 500 vol

 

[oldfed]

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.

Thanks for your feedback! On country risk, That is what I remembered => Political risk => Predictability of risks regarding government policy (democracy, dictatorship etc...)... I can't give you a confident answer because I was confused by the wording. There was a mix between risk continuity (Democracy) vs discontinuity (dicatorship) and predictability (easier to predict risk in authoritarian countries).

 

[schumi_frm]

Another on Open interest 360 & 500 vol

I think I chose open interest 360 and vol 440 or something like this (because it was said that one trader reduced a position).

For the probability of bull market I marked 15% but I thought I had done it wrong, was that the right answer?

For the GARP violation I chose that what he did wrong is to mention that there was a 60% chance of downgrade in the report.

 

[schumi_frm]

Thanks for your feedback! On country risk, That is what I remembered => Political risk => Predictability of risks regarding government policy (democracy, dictatorship etc...)... I can't give you a confident answer because I was confused by the wording. There was a mix between risk continuity (Democracy) vs discontinuity (dicatorship) and predictability (easier to predict risk in authoritarian countries).

Thanks oldfed. I was thinking about this one but I found it too generically formulated (not only about emerging markets) so I chose the other one saying that an investor was more likely to loose everything by investing in sovereign bonds of such a country than on a developed country....

 

[sk7]

I think I chose open interest 360 and vol 440 or something like this (because it was said that one trader reduced a position).

For the probability of bull market I marked 15% but I thought I had done it wrong, was that the right answer?

For the GARP violation I chose that what he did wrong is to mention that there was a 60% chance of downgrade in the report.

On your garp question I did the same, and also think that's correct.

 

[christylee]

What was the question for bull market ?
I can't remember a single thing about it..
And the answer for through the cycle and at the point in cycle? Found it hard but put external agencies tend to use through the cycle for rating

 

[schumi_frm]

The bull market question was one about calculating the probability (bull/bear vs economy state).

There was also one about VaR and ES, I chose that VaR(p1 + p2) always greater or equal than the individual VaRs (because of non-subadditive).

 

[oldfed]

Thanks oldfed. I was thinking about this one but I found it too generically formulated (not only about emerging markets) so I chose the other one saying that an investor was more likely to loose everything by investing in sovereign bonds of such a country than on a developed country....

It was one of those qualitative questions for which I spent 2-3 minutes reading the answers 3 times and keep the 25% random chance to get it right after the thinking time. ;-)

 

[oldfed]

What was the question for bull market ?
I can't remember a single thing about it..
And the answer for through the cycle and at the point in cycle? Found it hard but put external agencies tend to use through the cycle for rating

Agree with you for rating question.
As Shumi said, the bull markt was a Bayes/conditional probability application if I remember well

;-)

 

[Scopur]

The bull market question was one about calculating the probability (bull/bear vs economy state).

There was also one about VaR and ES, I chose that VaR(p1 + p2) always greater or equal than the individual VaRs (because of non-subadditive).

I remember it being written different . That ES (p1 + p2) <= p1 + p2. Probably read it wrong though. Although I don’t think var(p1 + p2) >= p1 + p2 makes sense. Take two continuous distributions and add the variance with negative correlation and your inequality fails.

 

[oldfed]

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

Hi Ankitrautela!

May I ask you a question about your point 11? => I do not remember that the conversion VAR was implying a combined 1d =>10d with a 95=>99 confidence level. I remember a question with a 95 to 99 conversion and another question with a 1d to 10d VAR conversion. Do you remember? Thks.