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Passing criteria RSS

David Harper, CFA, FRM, CIPM

Posted: 06 November 2009 10:31 AM   [ Ignore ]   [ # 16 ]
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Hi Nikhil

I don’t have time to do that (I am working hard trying to support my paid customers)...but if you want to draft something that can be shared with the forum, I promise to add my review as time permits…David

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nikhiliimk

Posted: 06 November 2009 10:36 AM   [ Ignore ]   [ # 17 ]
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Hi David,
Surely I agree to your commitments.
in your previous reply, you said that Handbook covers the L1 properly, does that mean that Credit Risk, Operational Risk and Basel II parts should be done from other materials as well?

Thanks,
Nikhil

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David Harper, CFA, FRM, CIPM

Posted: 06 November 2009 10:44 AM   [ Ignore ]   [ # 18 ]
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Hi Nikhil,

I think the handbook is an excellent *introduction* to all three (credit, ops, basel II)

but in regard to Credit & Ops: for the “new” L2 (since that material generally pre-dates L2), I think you almost *must* refer to the sources (many are simply not in the handbook)...it is not good strategy for credit and ops to use only the handbook

re: Basel: I think Jorion’s Basel introduction (in the FRM handbook) is maybe the best you’ll find anywhere. So, basel has more standalone utility. However, since it’s not been updated (really), you still want to refer to the additional papers in the study guide (e.g, concentration, IRC, market risk revisions) and, definitely do not skip the 19-page Explanatory Note on Basel IRB (good bang for buck)...
...so for Basel, I think it’s fine to use handbook PLUS the 6 or 7 additional Basel-related assignments (b/c much of that is definitely not in the handbook)

David

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ajsa

Posted: 11 November 2009 07:00 PM   [ Ignore ]   [ # 19 ]
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Hi David,

could you elaborate “GARP says that will set the pass as a ratio of the top 5%”? that is impossible for me. smile

BTW I wonder what I should assume for the following in case the question did not specify?
1. for 95% VAR, should I use 1.65 or 1.645?
2. should I assume continuous compounding?

Thanks.

David Harper, CFA, FRM, CIPM - 05 November 2009 09:13 AM

Hi Nikhil,

GARP says that will set the pass as a ratio of the top 5% ... venkat was told by a competitor that will be 75% of top 5%
http://www.bionicturtle.com/forum/viewthread/2058/

... which i do not believe. But either way, it amount to the same utility going into the exam: I don’t think the passing ratio can be known going into the exam. The new format has no precedents, GARP can’t precisely calibrate ex ante

David
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David Harper, CFA, FRM, CIPM

Posted: 11 November 2009 07:07 PM   [ Ignore ]   [ # 20 ]
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Hi ajsa,

they are saying they first find the 5th %ile score (sort of like VaR but in the + direction!); then they take a ratio of that; e.g., 5th %ile = 93% correct, then passing is P*95%. But they calibrate (P) after .... Therefore, I say, it isn’t useful ex ante ... just a variation on “grading on a curve”

Re 1.65 or 1.645? definitely should not matter, 1.65 should be sufficient

Re: compounding: as you know from the questions, they really *need* to say. But rule of thumbs: if bond, “default” to semi-annual (Tuckman), otherwise continous is a fine default (but questions should say….)

David

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