Exam Feedback November 2021 Part 2 Exam Feedback

[smile88]

I thought it was hard, focused alot on CI as someone said above and alot of them it could be a toss up between 2 answers. I liked being able to flag questions and go back to them but also missed flipping through the paper to focus on questions I’m sure of first.

It seems I got a diff paper than some as I don’t remember any model 1/model 3 and some othrr topics mentioned but here’s the ones I remember getting:
- Ques on AML
- Several on AI/Machine learning
-maybe 3 on covid
-stress testing and EBA results specifically
- calculationfor Vasichek model, Z Altman, beta of portfolio, and UL of portfolio, a long liq premium question, ES, Stressed Loss

my paper felt very credit risk heavy qualitatively which was intimidating as that was one of my weaker areas in studying but I’m hoping I did enough to pass.

Just to add it also sucks that there were topics I felt I mastered (surplus at risk, basel, etc that never came - just a subset of stuff that I could have never expected that in depth.

 

[FabbrisF]

Here are some questions I remember and the answers I gave:
1) Model 1, what is the volatility of the rate in the tree? I answered sigma*sqrt(1/12) = 0.24%
2) BCVA change (tricky) answered -53,000 (B)
3) Model 3, answered "non parallel shifts"
4) 3 year survival prob given hazard, answer: exp (-hazard*3)
5) structured product waterfall, credit enhancement senior 15K and equity 733K
6) Copula, maps into normal distribution (answer A)
7) Merton probability of Default using forumla PD= N(...), got 38.8% answer D
8) Green Swan, is difficult to predict and consequences are difficult to model (answer c)
9) FX options, imply more observation in both tails than lognormal
10) Reduce counterparty risk --> I answered "risk mutualization"
11) LIBOR/SOFR --> SOFR reflects changes in collateral markets
12) Basel Credit and Market Risk --> Market capital charge 23.7m answer B
13) CVaR, had to calculate beta with given correlation
14) UL of a portfolio given UL1 and UL2 and correl
15) CVA increases as recovery rate decreases
16) active risk aversion given information ratio and tracking error, answered 0.1
17) Surplus at risk, calculate vol of surplus cant remember the answer

Feel free to challenge answers and add more for completeness.

It seems indeed that the computer based version of the exam had two or more versions. I notice however substantial overlap. In addition, there are several questions from the MAY exam. These questions are identical, if you go on the May 2021 exam feedback you can see that.

To continue on my list, here are some of the other questions that were asked to me.

18) LDA, calculate Altman's Z score given a table with ratios and weights. I did the sumproduct (not sure)
19) Calculate the RAROC Hurdle rate (weighted avg return of common+pref shares)
20) Distance to default select the company most likely to default i.e. distance to default is shortest
21) Price of a 1 year semiannual zero coupon bond with real world prob 50-50
22) Net Liquidy : sources less uses
23) joint probability of default
24) default correlation
25) significance of alpha --> perform t test at 95% (not significant)
26) general question on value, momentum --> both are based on violations of EMH
27) Style Analysis definition
28) Regression Hedge using DV01 and beta
29) Basel 3 ratios: CET1, Tier 1, Total cap and Leverage ratio
30) liquidity adjusted duration: what happens if rates go up to equity given duration gap is negative

 

[dtammerz]

As others have said, the Part II Exam was more qualitative than quantitative (I had about 15 minutes left at the end and I counted out 17 quantitative questions where I had to use my calculator). I would also say that the LOs were covered quite well - all topics are fair game, and I felt it was important to pay attention to the "Describe" "Explain" "calculate" "apply" action verbs... in the learning objectives.
I did not think that the questions were "too lengthy" as I've seen in some of the past Part II exam feedback - for the most part reading the question at the end of the scenario was enough to understand what they wanted from you. With that being said though, it was a very tough exam for me. I left really not sure if I've gotten enough questions right to pass. The answer selections felt quite general / vague (there were usually 2-3 choices that could be correct) and there were not that many questions where I knew the answer off the bat.

Did anyone have a question which talked about "NOW" accounts (negotiable Order of withdrawals?) I cant quite remember the question but the answer choices included Super NOW, Money Market, Time Deposits in the choices. I couldn't reference to these products in my notes.

 

[dtammerz]

Is it just me or did anyone else feel there was no correct answer for the lognormal VaR question? I thought it was a super easy question but after calculating it twice none of the choices came close.

I had a lognormal VaR quantitative question. I was able to get the answer after scaling the mean & the volatility from annual to daily.

 

[Venkat k]

I had a lognormal VaR quantitative question. I was able to get the answer after scaling the mean & the volatility from annual

Yes same question I had.. and also
Timd/dollar value of return
Liquidity duration.
ARAROC
duration adjusted gap..
Libor and sofr 2 questions..
Some of these questions I remember

 

[kawal_frm]

Yes same question I had.. and also
Timd/dollar value of return
Liquidity duration.
ARAROC
duration adjusted gap..
Libor and sofr 2 questions..
Some of these questions I remember

had 0 questions on time/dollar, liquidity duration or gap duration or sofr in my version....I wonder maybe there were 7 different exams....a new one for each day. I had mine on 9th December....what day was yours?

 

[Venkat k]

had 0 questions on time/dollar, liquidity duration or gap duration or sofr in my version....I wonder maybe there were 7 different exams....a new one for each day. I had mine on 9th December....what day was yours?

On 4th Dec

 

[nc27]

had 0 questions on time/dollar, liquidity duration or gap duration or sofr in my version....I wonder maybe there were 7 different exams....a new one for each day. I had mine on 9th December....what day was yours?

On 10th there was a sofr question

 

[Hamam]

I’m going to get back with my detailed view of the exam but I’d like to point out that I realized that the exam can make you think your right. I really think that thinking it was relatively easy means you didn’t think enough. I feel like the way this exam is structured is that the more you know the topics the more you will need to dig deep to choose the right answer because you will be able to see the small cracks that most people who thought was easy couldn’t see. I actually think the harder you thought it was the better of a chance you will have.

 

[Hamam]

had 0 questions on time/dollar, liquidity duration or gap duration or sofr in my version....I wonder maybe there were 7 different exams....a new one for each day. I had mine on 9th December....what day was yours?

I think your right; there could of been many different exams. I had mine on the 9th aswell.

 

[genius237]

I wrote on 04 December 2021. 25% Quants and remaining qualitiative. Got a question correlation beta which sounded tricky but figured it out. The binomial tree was pretty straightforward. But the qualittaive questions were quite tricky like the one on EBA and SCAP

 

[ambrosianas]

I had a lognormal VaR quantitative question. I was able to get the answer after scaling the mean & the volatility from annual to daily.

I didn't even get the right answer after rescaling It by sqrt(252). Do You remember what's the letter answer for that? Maybe it's the end of the exam and I got too anxious to solve such an easy question...

 

[Hamam]

I didn't even get the right answer after rescaling It by sqrt(252). Do You remember what's the letter answer for that? Maybe it's the end of the exam and I got too anxious to solve such an easy question...

Did you rescale the mean also?

 

[kawal_frm]

I didn't even get the right answer after rescaling It by sqrt(252). Do You remember what's the letter answer for that? Maybe it's the end of the exam and I got too anxious to solve such an easy question...

had a similar question....rescaled mean and variance by 252 days given....and option B matched....I think answer was $933K

 

[dtammerz]

had a similar question....rescaled mean and variance by 252 days given....and option B matched....I think answer was $933K

I didn't even get the right answer after rescaling It by sqrt(252). Do You remember what's the letter answer for that? Maybe it's the end of the exam and I got too anxious to solve such an easy question...

for this question I rescaled the mean by 252, and the volatility by SQRT(252), and the answer was $1,330,xxx (I think it might have been "C")

 

[Hamam]

had a similar question....rescaled mean and variance by 252 days given....and option B matched....I think answer was $933K

The variance needs to be rescaled by the square root of 252.

 

[dtammerz]

One other question that bugged me was a UL calculation question where the EAD, PD, LGD, Volatility of LGD inputs were given. The Volatility of the PD was not given but they expected you to calculate the UL. Anyone know what other ways the volatility of the PD can be derived?

 

[Hamam]

One other question that bugged me was a UL calculation question where the EAD, PD, LGD, Volatility of LGD inputs were given. The Volatility of the PD was not given but they expected you to calculate the UL. Anyone know what other ways the volatility of the PD can be derived?

One other question that bugged me was a UL calculation question where the EAD, PD, LGD, Volatility of LGD inputs were given. The Volatility of the PD was not given but they expected you to calculate the UL. Anyone know what other ways the volatility of the PD can be derived?

Hey bro,
You need to derive the variance with the given PD, remember it’s a Bernoulli random variable so it was sqrt(p(1-p) for the volatility.

 

[kawal_frm]

The variance needs to be rescaled by the square root of 252.

yes...mean divided by 252....SD by sqrt(252) .....one of the answers did match exactly.....i think it was option B....but not 100% sure...not able to recall fully.

 

[Hamam]

yes...mean divided by 252....SD by sqrt(252) .....one of the answers did match exactly.....i think it was option B....but not 100% sure...not able to recall fully.

Yes, then you probably scored on that