Exam Feedback November 2019 Part 2 Exam Feedback

[Nicole Seaman]

We hope that everyone did well on the FRM Part 2 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!

 

[Kshitiz]

Hi Nicole, I took FRM level 2 this November
The exam had a lot of emphasis on the default probability calculation using hazard rate, there were 2-3 questions from SOFR as well. More or less the exam was on the expected lines.

 

[Peterfcm]

I thought it was highly qualitative!

And also something David might find irksome, is that there was a question on CVA adjustment, and the problem of whether to use unconditional or conditional probability came up. They had an answer for each way calculation which I thought was naughty. So I'm sorry but I went with the way they put in their practice paper!! Anyone know what the right answer was?

 

[Detective]

It was interesting. I was not surprised by any question, but there was a good amount of reading. It seemed easy to lose track of time if you got stuck on the numerical problems. My 2 cents:

1) Current Issues is free points (yes, there is free lunch). I think in total the readings for current issues is 182 pages. I would just read them. If that still is too much, then read the SOFR one (it is a hot topic in general). You are not tested for understanding on current issues, only remembering. For instance, there were 2 very easy questions on SOFR with some of the choices being comical. That’s 2.5% of the exam on remembering SOFR.

2) For numerical problems, using some reasoning and not blindly chugging away at formulas saved me a lot of time. With maybe the exception of 1-2 questions, all the numerical problems I could do a basic computation and eliminate 2-3 choices and get the right answer without having to go through the long math. To give an example — I don’t recall the exact numbers but a question posed two entities or bonds having X default probability and their correlation of default being 0.3, and asked what’s the probability of their joint survival. So to start (wrongly) assume their default is independent, hence zero correlation, multiply their survival probabilities, see that as an answer choice and eliminate it, and ask yourself if actual probability would be higher or lower?

 

[Yogi88]

Indeed..easy part was current issues but overall I wouldn't say if was easy... Too lengthy and i didn't manage time properly..

 

[Sixcarbs]

Hi @Detective,

I remember that joint question and did the same thing you did. I knew it wasn't that trap answer from just multiplying the two. But it was also a very well trained BT question.

I agree with @Peterfcm that there were a lot of qualitative questions. I felt very comfortable with almost all of the quantitative ones.

On the qualitative, some of them made me scratch my head. I feel like in the end I came up with the right answers, but we'll see.

I scored a 75% on the BT Mock 2 the night before, I took it cold and did not reference any notes or formulas. If that's an indication I may be ok. What do we think the raw passing score will be? If it's 65% and you can get 28 wrong, I think I will be ok. Then again, if my reasoning was not FRM enough who knows?

I took Part 1 in the morning so that could have been a factor too, I wouldn't have called myself fresh.

Barings Bank/Kidder Peabody lessons to be learned. I couldn't remember the exact details of the Kidder case and was torn between "Independent back office" and "Take note of unusual profits." I knew the former definitely applied to Barings so I went with "Independent back office."

Overall, like Part 1, I found the actual exam a level below the BT Prep and PQ's.

 

[Yogi88]

In market risk- Question on longnormal var( simple Cal), hoolee model( and was 1.xx), mean reversion, malling of forward usd-mxn forward, QQ plot (student t distribution), filtered simulation, default correlation

 

[Yogi88]

I don't remember the answers..please post if you remember any of those

 

[aksl]

Anyone answers for QQ plot and for CPR and SMM problem (I marked 29,1%)?

 

[DIANAM89]

I agree that was difficult to manage the time, because it was a lot of reading (need to understand and to choose the good answer),and quantitative, I didn't have the time to do all exercices (even if I know the formula).
It was a question about incremental VAR, I'm (almost) sure that I applied the right formula but I didn't get any of the choices!
Also, the exercice about LVAR, it was a multiplicative coefficient, so I didn't know how to use it.

 

[DIANAM89]

Anyone answers for QQ plot and for CPR and SMM problem (I marked 29,1%)?

I didn't know the distribution, neither how to calculate the SMM

 

[Yogi88]

Anyone remember the question on exposure to ccp( T, U, V)?

 

[Nicole Seaman]

Hi Nicole, I took FRM level 2 this November
I had a query I would like you to answer. While filling my GARP ID on the OMR sheet in the text boxes I misspelt one of the numbers so the invigilator asked me to simply overwrite that figure. However, I filled the correct circles for the GARP ID so I was just worried if my exam would get evaluated or not?

Hello @Kshitiz

Unfortunately, we are not able to answer questions like this on behalf of GARP. If you have any concerns about your exam, I suggest that you contact GARP directly, as they are the only ones that can really answer your question. Here is the contact page from their website: https://www.garp.org/#!/about/contact-us.

 

[RiskBG]

Anyone answers for QQ plot and for CPR and SMM problem (I marked 29,1%)?

On the QQ plot question : I marked the one saying "the tails and centrall mass of the distribution exhibit different slopes..." answer.

 

[Sixcarbs]

On the QQ plot question : I marked the one saying "the tails and centrall mass of the distribution exhibit different slopes..." answer.

Sounds familiar.

 

[DIANAM89]

Sounds familiar.

I think the same answer

 

[DIANAM89]

The question about the ir swap, uncollat debt
anyone remmber the answers?
I didn't find a good one...were strange all

 

[DesNewman]

Guys, I have to ask the question on RAROC. R14.5mil interest on the loan, R4.5mil costs for the loans, 1.5mil EL, 1.5mil UL, 30mil economic capital and 5% earned on the EC. The question said that the analyst correctly calculated the RAROC to be 15% - what was I missing on this question???

The way I see it, RAROC=(14.5+1.5-1.5-4.5)/30=33.3%. This question confused me for ages as it seemed like the numbers didn't add up. What did I miss?

 

[DIANAM89]

EL aren't substracted and it was transfer cost (2.5% I think)

 

[Sixcarbs]

Guys, I have to ask the question on RAROC. R14.5mil interest on the loan, R4.5mil costs for the loans, 1.5mil EL, 1.5mil UL, 30mil economic capital and 5% earned on the EC. The question said that the analyst correctly calculated the RAROC to be 15% - what was I missing on this question???

The way I see it, RAROC=(14.5+1.5-1.5-4.5)/30=33.3%. This question confused me for ages as it seemed like the numbers didn't add up. What did I miss?

In the table they included "Unexpected Loss- 1.5" which if you included did not get you the 15%. That was the trick, not to use that line entry.