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# Any Feedback on FRM 2009 Exam ?

#### ursraajk

##### New Member
Hi David,

Few key things written in the Rules & Regulation for FRM 2009. Need some clarity on that.

1) You will be graded as PASS/FAIL.

2) You will not know your scores.

So unlike last time, will there not be results in Quartiles?? This makes the evaluation totally hidden and stops looking for where you stand.

Kumar

#### dthigale

##### Member
Hi David,

I felt the same. The morning session was tough and time consuming. I was writing till the last minute. I finished one second after the proctor made announcement to stop and he almost was ready to file a report !! The exam was totally misorganized..a total mess in UCLA. They did not know exactly which rooms are availabe and there were no directions to find the rooms. Lot of candidates had to go back and forth. A bad start..

David, I wrote you a few days back that I may have to differ the exam because of family emergencies. I sent wrote you a private email for your advise. However, finally I went for the test but I did not feel that I missed any thing though I was not able to study about 10 days before the exam. Overall tone of the exam was that one needs to have a 5 thousand feet view (conceptual) rather than too much in details.

Very few quant questions in part II. Many questions on credit risk, SWAP and on barrier options ( I had suspected so) but the questions were confusing. I donot think there is any need to confuse students unnecessarily. It is not a test of english language or compositions!
Also I saw very few question in Fixed Income though.

Overall I may have to come back to you for Level 1 and I am ready to do so. However my goal is to look for a good job in Risk Management and though I donot pass the exam the training I received thru BT is invaluable for the purpose. Hats off to you David for being an excellent teacher. I wish I get a mentor like you and support / consulation in finding a good job!!

Thanks a ton!!

-D

##### New Member

It was so lengthy exam..... OMG...the practice questions from Jorion din't appear that lengthy or may be I was stressed.
Managed the AM session in hurry, but could pace very well in the PM session, in fact was done well in advance and could revisit some theoreticals - GARP's code of conduct appeared a nice googley..

David - I too noticed typos in the PM session. Does GARP remove ambiguous questions (test of english/comprehension) and then grade the rest? I recollect this being done on the audit side exams like CISA/CISM even PMP to some extent. Overall it was a good test. Next 40 days, I am the happiest person to be relieved of the exam fever... do you suggest to start preparing for CFA Level 1 ? I am from technology/maths background.
Your last week review notes were really helpful to me. Thanks a lot for all your support.
-Ajit

#### benoit16

##### New Member

6. Four investment choices were given with their residual returns and residual risks. We have to choose an investment with a min of 2% residual return over benchmark and with the highest information ratio. Some data was missing for the fourth investment which meant we need to calculate that.

I think I got investment 4 as the answer
Good morning Chinni,

I think I also had the forth protfolio for this one.

See you,

#### kktati

##### New Member
Hi

Just chanced upon this forum. It might have been useful had I seen this before taking the test.

I took the full test in Mumbai. There were more than 1000 ppl, most of them for full FRM.

Now, it wud be cliche to say that morning session was complicated. But i felt frustated that after having put in so many hours of study, the questons were so out of sorts.

I seriuosly think GARP should review their strategy 'cause at this level of complexity, luck factor plays major role than skill and I dont think GARP can run a performance attribution here. If someone is passing by sheer luck and guess work, it would be unfortunate and undermine the certification.

Afternoon session made much sense. Sure there were some tricky questions but they reward the one who has practised more.
Just hope for the best.

Cheers!!!

Kiran

#### benoit16

##### New Member

@benoit16: FANTASTIC DETAILS. Very helpful!! Wow!
Hello David,

I really appreciated JOp posting something similar last year:

That is why I posted these questions.

Thanks to JOp and also you for accepting me on this forum,

#### benoit16

##### New Member
Hello,

There were 32 people taking the exams in Geneva.
Less than 10 seats were empty.
Discussing with friends who passed it last year, It used to be around 20 taking the exam and 20 empty seats.

I have discussed with my neighbor after the test.
He had just passed his Master of Finance from the University of Geneva.
He seems to be well prepared, but I can not generalized from this case.

This exam is frustrating in so far as I could have reread and redone
But I guess GARP may do this in order to see how you react in stress conditions.

It is tough to tell if I have succeeded or not because of guesses I had to make
and the opacity of the passing conditions.
I think that Garp should provide the grades distribution and the passing conditions.
This lack of transparency is not a good point for the FRM certificate.

Knowing questions in the old exams is an enormous advantage for the candidate.
Therefore Garp should provide the full exams for all the past years in order to add fairness
between the candidates.

Discussing with friends who had taken the exam and reading posts on this forum is a great enhancer
because it boosts your preparation before the exam.

Therefore I would like to thanks again David and the contributors on this forum.
Let's keep in touch for the 5th of January.

#### gundu

##### New Member
Most of the comments have said that the AM session was more difficult than the PM session.

One would like to know if there is any likelihood that anybody would have successfully attempted close to 120 questions confidently in FRM 2009.

Simultaneously does any body who has just attempted 70 questions have any chances of making it...?

#### mcampero

##### New Member
Few words from Sao Paulo, Brazil:
1) Around only 30/30 candidates in the L1/Full exam. CFA exam still attracts much more.
2) Proctors were a bit disorganized.
3) I did ALL the exercices from the FRM 2009 Handbook (Jorion), from the Schweser Kaplan books (Study notes, Practice exams, Final Review and QBank) and from the GARP Final Review. From the viewpoint of learning, it’s amazingly fine. However from the point of view of passing the exam, I feel frustrated! The level of the exam was quite above the level of all the materials I used (in terms of time). Also year by year I realize that basic definitions are asked in a complicated fashion which might not be selecting the best candidates.
4) According to the exam, definitely we DO need to memorize lots of formulas in order to answer many questions within the time limit. Imagine if you make a mistake and want to re-calculate! Or, as some said, we need to change our way of studying and, as soon as we realize that a question demands many calculations, we should try to make a smart guess. It reminds me the way to study for the Quantitative Section of GMAT. In all of my study for the FRM exam I didn’t need to smart guess…
5) I think the exam took a significant change of direction, recognizing risk management needs to act quickly as soon as a crisis begins. The full exam put a lot of emphasis in time (4 or 5 statements within some questions, lenghty texts, not so simple calculations), as if we were traders, not risk managers. Maybe they’re right as it seems in many banks some risk professionals end up working in trading desks…
Cheers to all!
Marcelo Campero

#### cine

##### New Member
Most of the comments have said that the AM session was more difficult than the PM session.

One would like to know if there is any likelihood that anybody would have successfully attempted close to 120 questions confidently in FRM 2009.

Simultaneously does any body who has just attempted 70 questions have any chances of making it...?​

Well, attempting 120 might confidently might be difficult. 110 is Ok I guess. 60 questions in the PM and 50 in the AM. Some of my classmates did attempt 110.

I was told that the passing mark is 70%(i.e 98 marks). Some told me that even with 60%(84 marks), one could pass.
But GARP specifies that one needs to get 75% of the 95 percentiler. This 95 percentiler turns out to be 1000th guy (22000 registered and assuming 2000 are absent). I don't think there would be 1000 people who score 70% or above. That makes pass percentage 52.5% of marks( around 74). So anybody who gets more than 70 has reasonable chances of making it!

Assuming the 1000th guy gets 60%, then one needs to score just 45% of the marks ( around 63 marks)

#### munish_bansal1

##### New Member
David.

Isn't American call on non dividend paying is similar to European call; as it is never supposed to be executed before expiration? Hence put call parity holds for a European put and American call in a similar fashion as it is applicable to European put and call. Though I agreed it wouldn't hold for American put.

-Munish

#### ash007

##### New Member
Hi Munish_bansai1
Exactly. It was mentioned in the question that there is unlikely to be any dividend declared in the next 6 months. Since in case of non-dividend paying scenario american call is as good as european call, put call parity should hold good. Knowing GARP asks usually such vague questions didn't answer (d) which was we can't use put-call parity since it is an american call.

#### Patrick Pan

##### New Member
Hi David,

It was hard for me. I even thought that would be a surprise if I can pass after I completed the AM session because I felt so bad.
I was only confident on less than half of answers through thinking and reasoning. Around 1/4 of answers are guessed by appling the tricks I gained when taking GRE exam 15 years ago. The left are totally in God's hand.

I think it may be helpful for candidates if you can teach some skill of taking exam in the class on topics such as making educated guessing as the same time to cover all required knowlege.

Thanks

Patrick

#### prabal_sidana

##### New Member
Hi Munish,

With an american option, the put call parity doesn't hold any more and it becomes an inequality. So the limits of the "C-P" is preceded or followed by either a "<" or a ">" sign rather than an "=" sign. Hence, I think the fourth answer was right. "It is not optimal to exercise an American call option before expiration" but because it can be exercised, hence put call parity doesn't hold for American options.

#### Charly

##### New Member
Most of the comments have said that the AM session was more difficult than the PM session.

One would like to know if there is any likelihood that anybody would have successfully attempted close to 120 questions confidently in FRM 2009.

Simultaneously does any body who has just attempted 70 questions have any chances of making it...?​

Well, attempting 120 might confidently might be difficult. 110 is Ok I guess. 60 questions in the PM and 50 in the AM. Some of my classmates did attempt 110.

I was told that the passing mark is 70%(i.e 98 marks). Some told me that even with 60%(84 marks), one could pass.
But GARP specifies that one needs to get 75% of the 95 percentiler. This 95 percentiler turns out to be 1000th guy (22000 registered and assuming 2000 are absent). I don't think there would be 1000 people who score 70% or above. That makes pass percentage 52.5% of marks( around 74). So anybody who gets more than 70 has reasonable chances of making it!

Assuming the 1000th guy gets 60%, then one needs to score just 45% of the marks ( around 63 marks)​

Hello!!!

First of all thank you very much for all of your opinios and for all the support David gave during
the course.

I took my exam in Madrid, and after having prepared it for too many months, I really got surprise with the long questions we had to answer. This made me rush during the AM exam and guess some of the last 15 questions. For the first 50 quiestions I realliy felt confident. I never expected those wordy questions.....The PM exam was better to manage in time.

According to the "passing exam criteria" GARP disclosured, I think they only talk about a "ratio" that will be applied to the best 5% average. I guess they do not talk about this 75%. By the way, and unfortunately for all us, I think that the 95 percentil (suppose the top 5% is one thousend) will get more than a 70%. In my scenarios I was considering that the top 5% was geeting around 90%. I hope I am wrong....

I have another couple of questions from the exam:

1. You had to match 5 differente issues-risks to Operational, Market, Credit Risk......

2. You were asked about the maximun joint probability of incresasing in value two different stocks. The only information provided was the individual probability of decreasing. (as they said maximun I considered what would happen in case of "1" correlation).

Thank you very much to all of you.

#### fullofquestions

##### New Member
42 people took the Full Exam in Philadelphia. Not sure how many took the L1.

Everything people have mentioned so far is representative of the experience. I do agree that the questions asking for the 'closest to' answer are irritating. There was one that I cannot recall at the moment except for the answers. One was 15, while the other was 13 (I think) and I calculated 14.2. So 15 it was.

Congratulations everyone. Thank you David for such a great product; I know it helped me a lot.

One more thing. Would anyone care to comment on the question concerning the tracking error? From what I recall, there were four graphs, one for each strategy that was supposed to track the S&P500; or something. Only two of the graphs were close to the benchmark although one seemed to be closest. I chose that 'you cannot tell from the information provided' although the scales were the same and, like I said, one of the methods seemed to be better than the others. In all honesty I think this type of question is somewhat valid although it is kind of a waste of opportunity to test the individual. Any thoughts?

#### troubleshooter

##### Active Member
This is what I remember from Level I (Toronto)
---------------------------------------------------------------
1. Correlation question: 4 Graphs of scatterplots given - one with dots all ove the place, one V shaped, one with +ve slope and one with -ve slope

correlation. I chose the one with +ve slope.

2. VAR Aggregation Question: Two investments in a portfolio with VAR of 20 and 30 individually. The portfolio VAR = 40. What is the correlation betwenn the investments - I think the answer is 0.25.

3.Normal Distribution Question: Given Mean, Standard Deviation, need to find probability that a value X lies outside a given range. Normal distribution table is given.

4. T-Distribution Question: Given sample mean, sample size and standar deviation, need to find a confidence interval of 95%. t-distribution is given for df = sample size, df = sample size - 1 and for 2.5% and 5% at the right tail.

5. Given a simple liner regression with parameter estimation for b1 and b2. Also given, standard errors for both. Need to conclude whether b2 is significant.

Although the question was not straightforward and was quite wordy with double negatives.

6. Question on APT but was not able to figure out how it was to be solved. I think the regression is to be done on Global equity index and Global bond index of two markets A and B. Covariance matrix given for Gloabl Equity Index and Global bond index. Also Given are betas of Market A with both indexes and the same for market B. Also given are standard deviations of market A and market B. Need to find correlation coefficient between market A and market B. Very very tricky, had to guess.

7. Probability Tree question. Quite straight forward except the question was incomplete as for one of the nodes that direction of the move is not given. Had to guess but not my fault.

8. Question on Box spread. Not in curriculum. Had to guess again.

9. Binomial Tree Question for American Option question. Given up down ratio. Given risk free rate. Find risk-neutral probability of up movement. Also, find the value of the option. Could not get the right answer so had to guess. I guessed the one with value of the option equal to intrinsic value.

10. Share price forecasting after two time periods using Geometric brownian motion. Given are mean return = 0, a value given for standard deviation of the stock price, standard deviation of the weiner process (simulated) for the two periods.

11. Find the arbitrage profit, given forward price, current spot price, risk less rate and lease rate.

12. Qualitative question, how would you take the arbitrage profit with commodity that has lease market with cash and carry. (Need to choose an answer where the commodity is leased).

13. Multicolinearly question: Given a regression situation with multiple dependent variables with two of them correlated (I think Age and Experience of employees), need to specify why the regression might be problematic.

14. FRA valuation question. FRA is initiated on day 0. Need to find value of that FRA 10 days later (today). Given are 110 day libor, 20 day libor. Forward rate can be calculated using this for 90 day rate begining 20 days from today. As the fixed rate for for FRA is given along with the notional value, the value of FRA can be first found 110 day for now wich is then discounted to day.

15. There was a question on currency swap between USD and JPY which I thought was quite tricky. Firm pays a fixed USD rate (3.5%). Receives Japanese Libor.

Need to find which way the swap value will change given 4 different scenarios of whether USD rate changes to 3% or 4% or remains the same cobmined with FX rate betwen USD and JPY changes or remains the same. Not an easy one for sure.

16. Not much question on Linda Allen, except one really straight forward operational risk question, that I am not able to remember.

17. Couple of questions on GARCH(1,1). Given set of alphas and betas, need to find which one reverts to the long run average fastest or slowest (not sure about the direction).

18. Qeustion on GARCH(1,1) volatility estimation few periods (I think 10) given all the parameters.

19. Given a zero coupon bond and par bond with maturity 3 years. I think the question was which one had higher convexity.

20. Risk Management Foundations Question: What would happen to the value of the firm if it spent on reducing diversifiable risk?

21. Risk Management Foundations Question: What would happen to the value of the firm if it spent on reducing bankruptcy risks?

22. Transition Matrix Question. Given the transition matrix. Need to find the probability of upgrade and downgrade from one of the ratings. Quite straightforward except you do not inclue the probablity of remaining in the same rating from upgrade or downgrade probability.

23. Question on country risk: Likelyhood of reschedule increses with 1. Debt Service Ratio 2. Import Ratio 3. Investment Ratio 4. volatility of exports

24. Put Call Parity question. Given everything but American call option value given instead european. As the question states, the options are non dividend paying, it does not matter.

25. Margin Account Question: Given the forard prices for a series of days, initial margin value and maintainance margin value. Need to find the amount remaining in the account after about 6 days of trading. The price keeps going down so there was two margin calls, one just the day before the final day in question. Hence, the amount in the account is initial margin minus the loss on the last trading day ($1710 or something close to that) 26 Delta Hedge Question: A hedge is put in place for a call option writer by buy a certain number of shares. The delta goes down the following day and need to find how many shares are to be sold to keep the hedge delta neutral. 27. For put and call options, when is the delta highest. Answer: When at the money. 29. Poisson Distribution Question. Given the rate, need to find cumulative probability. No calculations needed as the choices give your the formulas to pick from. 30. Maximum likelyhood question (Hull - Volatility Chapter). Need to find the expression to maximize to find the maximum likelyhood. Taking ln of the given equation gives the answer. No need to memorize the formula. 31. Question on option with a given formula Max(S-F, 0) + K or something like that. We need to break this formula down to simple parts. I thought this was more like high school algebra than FRM. 32. Cost of carry forward pricing question with monthly cost of carry paid at the end of the month. Tenure 3 months. #### syaiful ##### Member Hi, 23. Question on country risk: Likelyhood of reschedule increses with 1. Debt Service Ratio 2. Import Ratio 3. Investment Ratio 4. volatility of exports i think the question ask about negative probability reschedule or something, just remember what *David* said on his video, everything is positive correlations (including Money Supply) except for the Investment Ratio. #### troubleshooter ##### Active Member I think the question asked what increases the likelyhood of reschedule. And only Investment Ration stood out among the choices.. #### al66440 ##### New Member Hello All, Having prepared for the exam months ahead, I was really surprised by the long questions and unnecessary information given. I’ve taken Level I Exam in New York City and here is “My 2cents”: Issues: - Time was a major constraint on first half of the exam - Lots of questions with a more information than necessary - First question was missing option # iii - Question on Box Spread, which I can only speak for myself had not seen in the curriculum - Question on rating migration which I don’t remember as being part of the curriculum for level I. - There a lot of question where you could eliminate 2 options by knowing which position to take. For instance, a portfolio manager looking to hedge a position with S&P futures, one could eliminate two options by assuming that the portfolio manager would need to short futures in order to hedge the portfolio. - Lots of empty seats Questions in the exam: - There was a question on perpetuity - Calculate Jensen’s Alpha - Question on Tracking Error where charts were actually given as opposed to real numbers - Question on CAPM and APT (Something along, APT being a special form of the CAPM) - Probability question (About a page long and still missing information on the question being asked) - least likelihood of debt rescheduling (Varex, Import Ration, Investment Ration) - One question to calculate Effective Duration - Discount factor question where a table with a list of bonds and different maturity were given (Cusip, maturity, price, etc). - VAR appeared several times, but one particular question as follows: Which of the following is amiss: Var(10 days) =$15MM, Var(15 days) = $XXMM, Var(20 days) =$XXMM, Var(25 days) = \$XXMM
- One question to calculate the highest rate of return on CD accounts. We were given a list of rates, 1 month, 3 months, 6 months, 7 months, and continuous rate
- Question on Black-shoel where we had to derive the Risk-Free Rate
- A question on GAMMA
- Hedge Ratio where Correlation was given, STD, Vol, Futures trading at 500 and 100 per contract.
- Question on factors affecting an option’s price
- Question on LTCM & Metallgesellschaft
- Question on Skewness and kurtosis. .
- Standard Error Question not well worded.
- Correlation Question where the actual charts were given
- Interest Swap
- Questions on Forwards and spots
- Question to match Liquidity, Market, Credit and operational risk to different issues (Wide bid/ask spread, Loss due to model forecast,….)
- Question on long run variance
- Questions on basis risk (one to identify the right option, the other, you’re given a position and need to determine whether you would benefit or not from a strengthening of the basis)
- Question on Cheaper to deliver
- There was a question on mean reversion
- Question on hypothesis testing

David thanks for all your wonderful work. I only wish there would be a way to align the level of difficult of the exam with the questions we candidate have access to.

Again, thanks for all your work,

Alex

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