Exam Feedback November 2018 Part 2 Exam Feedback

[haziqnazri]

I think the answer was US bonds. I followed these steps:
1) Get VaR of portfolio, before any additional exposures
2) Get VaR of US Bonds, given STDEV and exposure amount.
3) Calculate aggregate VaR using the square root formula, using the correlation given.

The output was an aggregate Var below the maximum "budget", which was not the case with European securities due to their high correlation (0,8 I think it was).

Yup/... 12.5 million VaR less than the limit of 13 mil

 

[shailthakker]

I think the answer was US bonds. I followed these steps:
1) Get VaR of portfolio, before any additional exposures
2) Get VaR of US Bonds, given STDEV and exposure amount.
3) Calculate aggregate VaR using the square root formula, using the correlation given.

The output was an aggregate Var below the maximum "budget", which was not the case with European securities due to their high correlation (0,8 I think it was).

Yup it was bonds due to low correlation

 

[shailthakker]

How about protection for class A tranche? I put cash flow waterfall

 

[[email protected]]

I think the answer was US bonds. I followed these steps:
1) Get VaR of portfolio, before any additional exposures
2) Get VaR of US Bonds, given STDEV and exposure amount.
3) Calculate aggregate VaR using the square root formula, using the correlation given.

The output was an aggregate Var below the maximum "budget", which was not the case with European securities due to their high correlation (0,8 I think it was).

The options had portfolio VaR as 12.5 or 12.9 for both US/EU stocks but that was no where close to the portfolio VaRs i calculated..

 

[MFT]

How about protection for class A tranche? I put cash flow waterfall

I answered overcollateralization, since the other answers were more like "features" of a securitization, rather than "credit enhancement", which sould be additional protection

 

[shailthakker]

I answered overcollateralization, since the other answers were more like "features" of a securitization, rather than "credit enhancement", which sould be additional protection

Yes but overcollateralization is for the equity tranche and not senior tranche

 

[jq0714]

I answered overcollateralization, since the other answers were more like "features" of a securitization, rather than "credit enhancement", which sould be additional protection

yea I chose the overcollateralization, seems more relevant to credit enhancement, tho not too sure.

 

[Seamus]

Yes but overcollateralization is for the equity tranche and not senior tranche

I answered water fall.

 

[shailthakker]

I answered water fall.

Me too

 

[[email protected]]

Does anyone remember the answer to a question where it was asked a correlation swap position is is equivalent to....

 

[[email protected]]

Any one remember that culture one with Lehman Brothers and AIG? I feel like both seem to be correct.

I chose Lehman brothers...

 

[shailthakker]

Probability of default within tree years was 21.13

 

[haziqnazri]

Does anyone remember the answer to a question where it was asked a correlation swap position is is equivalent to....

Long the index option and short the stock specific option

 

[shailthakker]

I chose Lehman brothers...

lehman is correct

 

[[email protected]]

Probability of default within tree years was 21.13

yes... 21.7%

 

[shailthakker]

Long the index option and short the stock specific option

it said short the index and long specific, which is incorrect

 

[[email protected]]

2 easy qsns on ES calc, and 1 on EL

 

[haziqnazri]

it said short the index and long specific, which is incorrect

then what is right? coz they did not mention the long correlation swap or short correlation swap

 

[[email protected]]

Long the index option and short the stock specific option

i exactly dont remeber the answer but chose the same i think

 

[shailthakker]

then what is right? coz they did not mention the long correlation swap or short correlation swap

I remember this was c, and b was the correct one