Exam Feedback November 2017 Part 2 Exam Feedback

[dseian]

I joined this forum recently for my Part 2 exam. I cleared Part - 1 in May 2017 but I did not feel the need to join the forum then as I had cleared CFA L2 exam in the past and was not worried about Part 1.

After joining this group I have realized that most of our answers are matching with each other and hats off to those who still remember so many questions from the exam.
Since the exam was doable, what do you think will be the cut off ? Are BT forum members more serious test takers compared to the rest? Since the exam was easy for everyone and the pass percentage remains around 50%, I am not sure whether to feel safe or not.

 

[Guarana]

Some more:
...
46/A wierd (IMO) question on losing value with futures, on financials, oil, and corn - did not really understand the underlying logic / went with oil / guess
...

Great memory! thanks for the listing. Regarding the 46 I believe there was also coal, did not undeststand the question logic but as oil and corn figures seemed to be going on the same direction and as financials choice did not made much sense among commodities I picked coal. However I am not even 100% sure that there was a coal option, I might be confusing it with oil

 

[romitdeb]

The answer has to do with anti-money laundering AML concerns.

Yup I agree with this, should be option D.

 

[bake5472]

Yup I agree with this, should be option D.

Was that the answer that said something about “doing business with embargoed countries”? That’s the answer I chose.

 

[trigg989]

I can't remember any of the questions and answers but some of your recollections are ringing a bell. I think this is only adding to my paranoia haha. I'll catch you guys in January. Enjoy the holidays!

 

[romitdeb]

Was that the answer that said something about “doing business with embargoed countries”? That’s the answer I chose.

Yeah that's the one.

 

[romitdeb]

There is one question that has been bothering me since the exam. It was seemingly straight forward, but maybe I was overthinking. It was the binomial interest rate tree problem to compute the price of the bond. The tree gave 6 month forward rates 6 months from now. My understanding is they needed to be converted to spot rate equivalents prior to discounting? Am I alone or did anyone else come to this conclusion.

As far as i remember, the answer was 961.17

 

[Dipanjan]

Time to wind up FRM postmortem and to start on CFA L3 prep.
January 3rd will decide if I need to go for one more shot at it.

 

[Martin B]

As far as i remember, the answer was 961.17

I think I got the same answer.

 

[bake5472]

Some more:

21/NIRP / not passing them on to retail customers / correct I think

22/MEVT / I said it can easily model any extreme event / incorrect most likely, I don't know why I went with that now..

23/Stressed RAROC / you just had to use the formula for all cases - can't remember which one but there was only one that matched / correct

24/Characteristic of distressed HF / long exposure to low credit quality / correct

25/lowest MVaR / beta was given and VaRptf/ptf value is a positive constant so just go with beta / correct

26/Asset allocation contribution / +0.28% I think - the highest value / correct I think

27/Impact of electronification / makes it advantageous to slice large orders into smallers one / could be correct but the formulation was a bit tricky

28/HFT intraday risk qualitative question on best practice / can't remember / unsure

29/BI vs standardized / I was confident saying that cap requirement would be higher under TSA, as the lowest business line coefficient is 12% as opposed to the 11% of Business Indicator, but after re-reading it I got confused and might have mixed things up / unsure

30/CCS exposure profile / FX Fwd + IRS / correct

31/Fama-French / the portfolio had a negative HML bias so expected to underperform as value outperforms growth / correct

32/New method of calculating VaR had suspiciously equal results for 99% VaR and 97.5% ES / possibly wrongly assumed normal distribution since 99% VaR = 97.5% ES for normal distributions / unsure as the formulation was tricky

33/Autocorrelation / went with educated guess / unsure

34/NSFR / unsure

35/Regression hedging / 820million or whatever the highest answer was - do not forget to adjust by beta / correct

36/Marginal and annualized PD / went with the 1 - T-th root... formula / looked right

37/Liquidity adjusted var / it was EXOgenous since we have no material impact on prices + use mean+factor*vol / correct

38/Stress loss / difference between stressed loss and "normal" loss / correct

39/40/2 questions on unsmoothing returns / I went with "no effect on expected returns" as I mistakenly thought it would simply increase volatility / wrong

41/What happens to CCP initial margin required when volatility rises / higher initial margin is required / correct

42/Another question on ES (not the 99-99.2%-99.4% one) / can't remember much more but I am fairly confident with this concept so I am gonna be optimistic / correct

43/Credit VaR calculation / UL - EL, can't remember more details / correct (straightforward)

44/45/2 questions on External debt in emerging economy/ I did not fall into the traps of "the local government would depreciate" (it says in the curriculum that precisely they would rather default than depreciate home currency) and "SMB will receive more lending than large companies" (the opposite) / educated guesses but not 100% sure..

46/A wierd (IMO) question on losing value with futures, on financials, oil, and corn - did not really understand the underlying logic / went with oil / guess

47/Stratification vs linear vs screening / I think I said LC does not take into account T-costs / probably wrong

48/Third line of defense / independent review / correct

49/I think a surprisingly easy one on cumulative PD / used 1-exp(lambda*T) / should be OK unless there was a trap somewhere...

50/CDS bond basis / ? / ?

Getting really foggy after that...

@davidhn - I'm confused by your statement on 39/40 - you said "I went with 'no effect on expected returns' as I mistakenly thought it would simply increase volatility". I actually went with the same answer and here is a copy and paste from another section of the forum:

Unsmoothing affects only risk estimates and not expected returns. Intuitively, estimates of the mean require only the first and last price observation (with dividends take “total prices,” which count reinvested dividends).12 Smoothing spreads the shocks over several periods, but it still counts all the shocks. In Figure 13.2, we can see that the first and last observations are unchanged by infrequent sampling; thus unsmoothing changes only the volatility estimates.

Is there a reason you feel your answer is incorrect? It seems correct based on the Ang reading and the answer above to a very similar question. I'm just hoping to correct my thinking if I'm wrong here. Anyone else have an opinion? Thanks!

 

[[email protected]]

First of all I would like to thank David. I don't wanna be boring, but you have a gift man in conducting all these people for 1 year of their lives. Very very well done!
About the exam cannot remember other questions (you have already covered almost all the topics, I had orange paper), just my own impressions.
The exam wasn't so hard, difficult but not extremely tough. Do not worry about time constraints, that is not like the PART 1 where you have to run without breathing. Of course, not plenty of time but probably you can complete the exam on time.

The problems for PART 2 are tricky questions, traps and lot of totally useless verbiage. When you finish to read the question, you have already forgotten the beginning. Keep attention on that, mark the info you need!
Additionally, lot of traps and tricky qualitative questions. At the end you remain with a 2 possible answers that seem perfectly plausible. Do not be angry for that, mark one and go ahead.
About quantitative questions, not so hard but you have to remember exactly the formula to apply and, if not, well that's a problem. So memorise as many as you can.

So waiting for january3, if not passed meet again in may. Good luck to everyone!!!

 

[riteshrr99]

They gave you the yield of T-BOND with 4 years to maturiy and I used it like the Rf

But as per what i recollect corporate bond was for 5 years, and this formula can be used only when the corporate bond and T-Bond have same Maturity. Here T-Bond mentioned was for 4 years.

 

[davidhn]

@bake5472 I would love to be proven wrong but sadly I have little hope on this one. I am at work right now so I only have my Schweser books (feel free to double check with BT in the meantime) which say: "Unsmoothing returns affects risk and return estimates, and could have a dramatic effect on returns. For example, reported real estate returns during the 1990s downturn were -5.3%. The corresponding unsmoothed returns were -22.6%". Pretty univocal to me.

Any thoughts on the other questions, anyone?

I am a little freaking out as I calculated my expected score on a spreadsheet from what I remember and I get 67-73% depending on how conservative I am for the questions I vaguely remember.

Any idea what the minimum passing score could be? I am hoping lower than 70%.

Cheers

 

[Dipanjan]

@davidhn -
Unsmoothing affects only risk estimates and not expected returns. Intuitively, estimates of the mean require only the first and last price observation (with dividends take “total prices,” which count reinvested dividends).12 Smoothing spreads the shocks over several periods, but it still counts all the shocks. In Figure 13.2, we can see that the first and last observations are unchanged by infrequent sampling; thus unsmoothing changes only the volatility estimates.

Is there a reason you feel your answer is incorrect? It seems correct based on the Ang reading and the answer above to a very similar question. I'm just hoping to correct my thinking if I'm wrong here. Anyone else have an opinion? Thanks!

I went with the same answer.

There is a little discrepancy between Schweser and text
The text says desmoothing does not impact return, but sch thinks it does. I preferred to stick to text.

This question has been asked in the forum earlier I believe.

I think 45-48 Raw score should be enough.

 

[Navneet02]

M

I think I got the same answer.

me too , though I applied normal bionamial discounting

 

[zahra.saied]

Am wondering too, since a lot of us have similar answers m, does that make the grades generally closely tight to each other? Or is it because we have all been using BT?

Also, @Nicole Seaman do we have a breakdown of the passing rate for BT users for level 1 and level 2? We see 73% passing rate but without the breakdown

 

[zahra.saied]

Can' believe it's only been 11 days since the exam! This waiting journey is surely going to be loong

 

[antogiar]

Sure it will. Still 5 weeks to go

 

[berrymucho]

Am wondering too, since a lot of us have similar answers m, does that make the grades generally closely tight to each other? Or is it because we have all been using BT?

Also, @Nicole Seaman do we have a breakdown of the passing rate for BT users for level 1 and level 2? We see 73% passing rate but without the breakdown

There might be some reporting bias... not everyone is comfortable talking about their experience, or just simply don't remember the details as clearly. And seeing a group of peers agreeing on their answers might even be less of an incentive to share that you got a different answer. However, the extent to which the posts may indicate consistency and cohesiveness by the BT-trained candidates in itself is a nice result.

 

[antogiar]

Nothing for me.