Refreshed Practice Question Documents

[David Harper CFA FRM]

Hi Abhishek,

Before the exam next monthly, my only plan for a PDF is to try and finish a T4. Global Topic Review (where I am currently at http://forum.bionicturtle.com/threads/p1-t4-207-expected-and-unexpected-credit-loss.6301/)

we don't have other T4 PDF plans, to my knowledge.

Suzanne Evans: can you see what he means, thanks,

 

[Suzanne Evans]

Here is my analysis of Topic 4 practice questions. Unfortunately, its impossible to be current on all practice questions each year. As David stated above, we do plan to publish a T4 Global Topic Drill question set. We also have (2) Mocks available (more coming!) for Part 1.

Red = No practice questions published around the reading.
Green = Practice questions are published around the readings and in the pdf's in the planner (http://www.bionicturtle.com/my-account/study-planner) If there is a pdf, the link has been provided.


Linda Allen, Jacob Boudoukh and Anthony Saunders, Understanding Market, Credit and Operational Risk:
The Value at Risk Approach.

• Chapter 3 .............................Putting VaR to Work
• Chapter 5 .............................Extending the VaR Approach to Operational Risks

Hull, Options, Futures, and Other Derivatives, 8th Edition.

• Chapter 12 ............................Binomial Trees (used to be Chapter 11, 7th ed.)
• Chapter 14............................The Black-Scholes-Merton Model (used to be Chapter 13, 7th ed.)
• Chapter 18............................The Greek Letters (used to be Chapter 17, 7th ed.)

PDF’s Here:

http://www.bionicturtle.com/how-to/question/valuation-risk-models-hull-chapters-1113-17-l1.t4/
http://www.bionicturtle.com/how-to/question/t4.hull-chapters-13-14/
http://www.bionicturtle.com/how-to/question/T4.-Option-Greeks-Hull-Ch-17/

Bruce Tuckman, Fixed Income Securities, 2nd Edition (Hoboken, NJ: John Wiley & Sons, 2002).

• Chapter 1 ..............................Bond Prices, Discount Factors, and Arbitrage
• Chapter 2 .............................Bond Prices, Spot Rates, and Forward Rates
• Chapter 3 .............................Yield to Maturity
• Chapter 5 .............................One-Factor Measures of Price Sensitivity

PDF’s Here:

http://www.bionicturtle.com/how-to/question/t4.basic-bond-pricing-tuckman/
http://www.bionicturtle.com/how-to/question/t4.one-factor-measures-of-price-sensitivity-tuckman/

Caouette, Altman, Narayanan, and Nimmo, Managing Credit Risk, 2nd Edition (New York: John Wiley & Sons, 2008).

• Chapter 6 .............................The Rating Agencies
• Chapter 23...........................Country Risk Models

PDF’s Here:

http://www.bionicturtle.com/how-to/question/t4.rating-agencies-altman/

Arnaud de Servigny and Olivier Renault, Measuring and Managing Credit Risk (New York: McGraw-Hill, 2004).

• Chapter 2 .............................External and Internal Ratings

Michael Ong, Internal Credit Risk Models: Capital Allocation and Performance Measurement (London: Risk Books, 2003).

• Chapter 4 .............................Loan Portfolios and Expected Loss
• Chapter 5 .............................Unexpected Loss

PDF’s Here:

http://www.bionicturtle.com/how-to/question/t4.expected-and-unexpected-loss-ong/

Kevin Dowd, Measuring Market Risk, 2nd Edition (West Sussex, England: John Wiley & Sons, 2005).

• Chapter 2 .............................Measures of Financial Risk

PDF’s Here:

http://www.bionicturtle.com/how-to/question/t4.measures-of-financial-risk-dowd/

John Hull, Risk Management and Financial Institutions, 2nd Edition (Boston: Pearson Prentice Hall, 2010).

• Chapter 18............................Operational Risk

Jorion, Value-at-Risk: The New Benchmark for Managing Financial Risk, 3rd Edition.

• Chapter 14............................Stress Testing

“Principles for Sound Stress Testing Practices and Supervision” (Basel Committee on Banking Supervision
Publication, Jan 2009).

• We do not have questions for this reading.

Thanks,
Suzanne

 

[bhar]

This is very helpful.

Is it possible to publish a similar topics wise list for the other 3 topics as well in Part 1 or direct me to the location for the questions on the other 3 parts.

 

[David Harper CFA FRM]

Suzanne Evans I agree your list is very useful, to @bhar's point I do think an overall map (PQ assignments vs. our PDFs) would be helpful, but I think we should orient it toward the May 2013, I don't think it's a great use of our time between now and next month. If we do it against May 2013, then we can even share the outline as our PQ planning tool,

 

[Suzanne Evans]

bhar,

I agree with David on the above. The analysis above did involve a bit of time therefore I will plan to put together an analysis for 2013 as soon as the contents are distibuted to GARP. I'm currently working on mock exams which is where I need to divert my attention so I can try and get a few more published prior to the exam.

Thanks,
Suzanne

 

[salman Mustafa Baig]

Mr David, mentioned topic is very important for FRM level I , kindly provide PDF of practice questions of this chapter ...

Allen, Boudoukh, and Saunders, Chapter 2: Quantifying Volatility in VaR Models ...........

Thanks

 

[David Harper CFA FRM]

Hi Salman, the Allen reading on volatility is basically redundant with, and inferior to, John Hull on volatility: we cover volatility through the PQ on Hull's Estimation of Volatility, thanks,

 

[Suzanne Evans]

salman Mustafa Baig,

With the exam right around the corner as well as the 2013 contents being published soon, we will not be releasing any new practice questions correlated around particular readings for 2012. After we receive the 2013 contents, we will analyze all of the changes and produce a calendar with our timeframe for publishing new contents. At that time, David will pick back up with creating practice questions for the missing readings. Unfortunately, it's impossible to be up to date every year on practice questions for all readings.

Just to clarify, we do not have a pdf for the chapter above.

Thanks,
Suzanne

 

[bhar]

bhar,

I agree with David on the above. The analysis above did involve a bit of time therefore I will plan to put together an analysis for 2013 as soon as the contents are distibuted to GARP. I'm currently working on mock exams which is where I need to divert my attention so I can try and get a few more published prior to the exam.

Thanks,
Suzanne

Hi David, Suzanne

Yes, I agree too. Mocks are better way to work towards the final day.
Thanks

 

[Amberly]

I am looking at taking the FRM part 1 in May 2013. I am planning to put in more hours than the average exam taker because I have never been very good at taking tests. Since I will also be working full time and have a young family, I am not sure I can do both exams in one year-- but I will try. I am counting on my employer paying for the GARP test registration and prep materials, I would be supplimenting my studies with Bionic Turtle on my own dime. Since money is tight, I am trying to decide 1- when to start paying for the year subscription and 2- what I should be studying now to get a jumpstart on the exam. I saw a coupon for $100 off the p1 & p2 full subscription... which is great marketing by the way... It is helping me commit to taking 2 exams next year... which means I have to pass at least part 1. Please help me with #1: Timing for the Bionic Turtle Subscription: how do I time paying for the subscription to ensure I will have each day leading up to the November exam? #2- If I have to wait to get access to paid content (both Bionic Turtle and the 2013 FRM materials), do you have any recommendations on what/how should I be studying now? I do have the topics, so I am starting to review what I can based on old textbooks from my masters program in economics-- but I am not sure how efficient what I am doing is.

Thanks for any help you can offer. Amberly

 

[Suzanne Evans]

Amberly,

RE: #1: Timing for the Bionic Turtle Subscription: how do I time paying for the subscription to ensure I will have each day leading up to the November exam?

If you are taking Part 2 in November 2013, I'd recommend that you purchase AFTER this upcoming November exam. Your purchase is valid for 365 days from the date of purchase. (Example: If you purchased November 17, 2012 you would continue access through approximately November 17, 2013.

RE: #2- If I have to wait to get access to paid content (both Bionic Turtle and the 2013 FRM materials), do you have any recommendations on what/how should I be studying now? I do have the topics, so I am starting to review what I can based on old textbooks from my masters program in economics-- but I am not sure how efficient what I am doing is.

I'd recommend that you purchase after the November 2012 exam and then you can begin preparing for the 2012 content until the 2013 has been released and published.

Thanks,
Suzanne

 

[orang3eph]

I'm going through the Global Topic Drill for T3 and I'm impressed. Props for a job well done. Looking forward to T4, if in David's plans.

 

[David Harper CFA FRM]

orang3eph, thank you, I really appreciate that. Those took longer than AIM-by-AIM but I am can't wait for us to resume progress on Global Drills for all topics. So, yes, we intend, but no, it won't make the exam next week. Thanks for your encouragement!

 

[FRMVikram]

Hi DAVID,

Link https://forum.bionicturtle.com/threads/l2-t7-b5-
standardized-approach-to-credit-risk-under-basel-ii-basel-iii.4419/
is not working .I have doubt in question--->>
B5.3. If a bank retains the equity (junior) tranche of a securitization where the notional of
the tranche is $10 million and the tranche has a long-term “B-” credit rating, what is the
capital charge under the standardized approach for securitization exposures?
a) $400,000
b) $800,000
c) $1.2 million
d) $10 million
As per answer--->>
B5.3. D $10 million
B+ and below rated securitizations are DEDUCTED while implies a 1,250% risk weight such
that CRC = $10 MM * 12.5 * 8% = $10 million; i.e., capital equal to the full notional

I was using charge of $10MM*150%*8%=1.2 million.
Plz explain..

 

[David Harper CFA FRM]

Hi FRMVikram - Under the SA to securitization exposures (which is, btw, under review by BIS http://www.bis.org/publ/bcbs236.htm ), the risk weights for any securitization tranche (seniority, maturity) is 1,250%. That's a way of requiring the bank to hold (regulatory) capital against the full notional of the exposure. You used 150% so your charge is $1.2 million (regulatory) capital held against a $10 million exposure, which would be correct for pretty much any typical non-securitized exposure rated CCC+ or below (i.e., sovereign, bank, corporate loan); but securitized exposures, deemed much riskier, require even more capital, up to (at these lower ratings) capital equal to the notional.

If the 1,250% is confusing, I recently posted this http://forum.bionicturtle.com/threads/reading-52-qb5-3.7365/#post-26547 Thanks!

 

[FRMVikram]

Hi FRMVikram - Under the SA to securitization exposures (which is, btw, under review by BIS http://www.bis.org/publ/bcbs236.htm ), the risk weights for any securitization tranche (seniority, maturity) is 1,250%. That's a way of requiring the bank to hold (regulatory) capital against the full notional of the exposure. You used 150% so your charge is $1.2 million (regulatory) capital held against a $10 million exposure, which would be correct for pretty much any typical non-securitized exposure rated CCC+ or below (i.e., sovereign, bank, corporate loan); but securitized exposures, deemed much riskier, require even more capital, up to (at these lower ratings) capital equal to the notional.

If the 1,250% is confusing, I recently posted this http://forum.bionicturtle.com/threads/reading-52-qb5-3.7365/#post-26547 Thanks!

Thanks David! its clear now.