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FRM Level 2 , Nov 2012 : Post what you remember here

#81
Hey kuch2r, I also chose ES since stddev is not translation invariant and VaR does not necessarily fulfill the subadditivity requirement for a coherent measure. However, if I recall correctly, the Schweser Notes just 1 to 3 pages (bottom) or so further in that topic, say that stddev and VaR are special cases of coherent measures or something like that. And, as others have said, it was written in the Notes that ES is not easy to understand... I'm guessing that Garp wanted to hear ES, but it is not all clear . . .
You are absolutely right! but still the answer is debatable because neither ES or Standard deviation are totally right answers...
 
#82
Hey kuch2r, I also chose ES since stddev is not translation invariant and VaR does not necessarily fulfill the subadditivity requirement for a coherent measure. However, if I recall correctly, the Schweser Notes just 1 to 3 pages (bottom) or so further in that topic, say that stddev and VaR are special cases of coherent measures or something like that. And, as others have said, it was written in the Notes that ES is not easy to understand... I'm guessing that Garp wanted to hear ES, but it is not all clear . . .
In terms of "pure" coherent risk measure, the ES was the easiest one to interpert (comparing with the second possible option - spectral risk measure).


http://www.co.orange.nc.us/sheriff/JailCustodyReport/jailcustodayreport.htm
 
#83
re asian option
any chance the answer is 0.5?

it is in the money --> delta = 1
but it is an asian option, hence the averaging process mitigates px sensitivity --> 0 < delta < 1
 
#84
On Hedging question, -120 would be correct if the corr coeff was 1 (i.e. they were perfectly corr).But in the question they had given corr coeff, Sd1, SD2. So, it should be (corr coeff)*SD2/SD1 which gives 30 and as you mentioned, since iti s a short positon. it brings -30. Isnt that right?
Everything depends on your value in the denominator. SD1 should be defined as a standard deviation of instrument that was used for hedging purpose. I got the same answer as you (-30) but unfortunatelly i put a wrong value into the denominator.
 
#85
Does anyone remember the exact formula to use and the numbers for the values to input regarding the hedging question (-30 or -120)? That should have been a really easy question.
 
#86
Hi,



Thats all I remember now. I will keep updating if I remember more. Btw after I marked all the answers, I just noticed that 40% of the answers esp in the latter half are D). Did you guys also feel the same.
Thank God you talked about this 'D'. I had 7 back to back Ds (of which some may be wrong) but still D dominated my sheet.
 
#88
Allied Irish Bank - John Rusnak - 2 options were very close - Inexperienced Manager/Inexp control ppl.

I chose 2nd because qstn asked wat led him to hide his fake Transactions. Inexperience of Manager will be too broad a reason in this context.

Managing tail risk: I remember the option as "POSITIVELY" correlated with tail risk and not Negatively .. did i read it wrong ? :( .. I chose 'Invest in US Treasury'
 
#89
The question on liquidity duration...two stocks, traded volumes, etc..

I got 12 days for this question...i see some calculated 9 days?

Also, the question on the CDS pricing...was default assumed at the end of each yr? I got 29bps as the spread but if thats the case then i got this one wrong
 
#91
9 days because you don't have to liquidate one after the other (imagine how long it would take otherwise if you had a portfolio using 100 stocks or so). It took 9 days to liquidate one of the stocks given the volume you had in that stock and the volume you could liquidate per day in that stocks market. And 3 days for the other which you can liquidate at the same time in its respective market...
 
#92
The question on liquidity duration...two stocks, traded volumes, etc..

I got 12 days for this question...i see some calculated 9 days?

Also, the question on the CDS pricing...was default assumed at the end of each yr? I got 29bps as the spread but if thats the case then i got this one wrong
The default was assumed to occur at the end of each year.
 
Thread starter #93
As far as I remember the question was about coherence risk measure that is easy to interpret and definitely standard deviation is a wrong answer as it does not fulfill the axiom of translation invariance.
Could you tell me, this question is from which particular topic? I remember reading it, but am unable to search it back.
 
#95
28: Mortage pool is structured into two tranches A and B. Coupon payments for mortgage pool and tranch A were given in a table. And Coupon payment for Tranch B was asked. Simple Math.
Ans: LIBOR + 88bp

Does anyone has an answer LIBOR +99bp..
BioNerd - Yes I had the same. Initially I just worked with spread and by direct maths got some other answer (+88) . But then, to reinforce my calculation,I did back calculation with that spread to find that $ values aren't matching. So, I started with $ values and following the concept of Zero-Sum got +99.
 
#99
The question on liquidity duration...two stocks, traded volumes, etc..

I got 12 days for this question...i see some calculated 9 days?

Also, the question on the CDS pricing...was default assumed at the end of each yr? I got 29bps as the spread but if thats the case then i got this one wrong
It was 9 days because the formula goes: min(liq dur stock a, liq dur stock b).

I think you added their liquidity durations that's why you arrived at 12 days.
 
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