Exam Feedback November 2019 Part 1 Exam Feedback

[Fisuca]

The answer to the options trading strategy should be "straddle", right?
I found the exam lengthy as well. I had to cut short/guess on a good number of questions. Even the answers were not matching in a few, like in the question pertaining to the option pricing using the Black-Scholes model...I wasted a good amount of time on them..sigh!

Yes, as strangle was the only vol-long strategy ...given the scenarios, nothing else made any sense, especially not the spreads

 

[Maggie3344]

I did not have straddle as answer. I had strangle (blue book).

I have a blue book and I think the answer was buttlefly spread.. not sure if that is correct

 

[i.brahimtoor]

Did anyone else have a lot of C and D as answers, especially in the first 50 questions? Very less A in the whole exam? I had the red booklet.

 

[adeex18]

yea, glad i'm not the only one. I had a decent amount of D's especially in the first 50 questions. I think I had the Red booklet as well, can't fully recall though.

 

[JamesVU2000]

= (39.03)(0.58) − (40)−(0.09)(0.5) (0.4359) = $ 3.671 . this is the answer from Hull with dividends. did they want use to computer the present value of the dividends? or was it a trick question. either way. the exam is way way way too difficult

 

[JamesVU2000]

so i guess you would subtracted the dividend from the stock price? but did you need to compute present value too?

 

[Fisuca]

so i guess you would subtracted the dividend from the stock price? but did you need to compute present value too?

You either subtract the PV of the dividends from the Stock or you calculate the corresponding dividend yield q and discount the Stock with that before multiplying with N(d1)

 

[Venkat k]

Delta of the call option is given. Asked to find Delta of the short call option. Delta of the call option always 0 to 1.so Delta of the short option is n(d1) -1(put option) which is always -1to 0.. So the answer is. 68xxx-1 ie -. 32xxx.is it correct. I may be wrong.

 

[P Bhattacharya]

Pretty sure it was a short call , can anyone remember?

I also remember it asked about short call

 

[yz1300]

I don't remember it being cancelled, just remember it not being filled. It was placed the day before, after the close.

A Fill or Kill wouldn't need to be cancelled, it is just filled or killed (Cancelled) automatically.

This is one of the few parts of the exam where I have professional experience. I spent many years working on the trading floor, and I am sure that question described a limit order.

agree. it is a limit order

 

[yz1300]

I did not have straddle as answer. I had strangle (blue book).

yes I put strangle as well

 

[Venkat k]

I guess butterfly as the stock prices stays close to strike price.

 

[vasan_mnm]

Does anyone remember the answer to the Monte Carlo no of simulations required and barbell convexity

Initally the mean of the sample was 8. 5000 simulations done and the now average mean is between 6 and 10. How many more simulations required to find the mean..something of this sort. Answers were 5000, 25000, 30000

 

[randrema]

Delta of the call option is given. Asked to find Delta of the short call option. Delta of the call option always 0 to 1.so Delta of the short option is n(d1) -1(put option) which is always -1to 0.. So the answer is. 68xxx-1 ie -. 32xxx.is it correct. I may be wrong.

I think the answer is -0.68. A short call is not equivalent to a long put. The sign of N(d1) has just to be reversed.

 

[Victor93]

X has 2 exposure with CCP, Y has 10 exposure with CCP, so initial margin will be based on: 12 exposure. I do not remember exactly, Am I correct?

 

[Sriharsha]

Initally the mean of the sample was 8. 5000 simulations done and the now average mean is between 6 and 10. How many more simulations required to find the mean..something of this sort. Answers were 5000, 25000, 30000

15000 was also one of the option..what is the answer for this?

 

[tweakpun]

I did not have straddle as answer. I had strangle (blue book).

Yes. It was strangle only. Typo..

There was one question on conditional probability regarding bond defaults...Anyone remembered how it was to be done...?

 

[Sixcarbs]

Yes. It was strangle only. Typo..

There was one question on conditional probability regarding bond defaults...Anyone remembered how it was to be done...?

It involved this formula if it's the one you are speaking about:

Cov(X,Y)= E(X*Y)-E(X)*E(Y), solving for E(X*Y)

Probability of both bonds defaulting given the probability of each bond defaulting individually, and the correlation between them.

 

[Sriharsha]

Does anyone remember the variation margin question (blue book) or answer, I remember that answer which I got was around 1lakh+ ?

 

[Sriharsha]

Reply you mean which had a limit on minimum SR requirement and highest IR?

What was the answer for this SR & IR one, does anyone remember..?