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Exam Feedback FRM Part 1 (May 2014) Exam Feedback

zubs84

New Member
there were 2 questions on expected and unexpected loss. did anyone manage to work this one out correctly or remember what it was? i worked out that adjusted exposure was 3 million (if i remember correctly), but i almost tore out my hair trying to work out the expected loss and select an answer from the list!
 

amresh

Member
Subscriber
there were 2 questions on expected and unexpected loss. did anyone manage to work this one out correctly or remember what it was? i worked out that adjusted exposure was 3 million (if i remember correctly), but i almost tore out my hair trying to work out the expected loss and select an answer from the list!
Dont remember anwers. But i remember that their definition of UGD was tricky so i tried with 1-UGD too, just to see if it is in one of the options.. Though i struggled to find unexpected loss and hopefully found that in the end.:cool:
 

amresh

Member
Subscriber
this was one of the topics i read lot of times. and still made mistake..:(
Selected normal,.... -> normal market and contango have the same meaning. So does inverted market and backwardation.

Append - Please ignore my earlier note w.r.t,...normal / contango & inverted / backwardation meaning the same.
Normal / Inverted are terms use to describe a futures price curve which is an increasing / decreasing function of time to maturity.
Contango / backwardation are terms used to describe the futures price drift towards the spot price as you approach maturity.
 

Adelaide

Member
average exposure was about 67k... I got an answer from the given options for expected loss. then used the formula for unexpected loss which is pretty straightforward and didnt get a proper answer... may be it was a calculation mistake. or was there something tricky that I missed?
 

Adelaide

Member
btw - seems like a lot of people are posting what they did, but I stll couldnt see a final answer for some of the questions...
 

amresh

Member
Subscriber
btw - seems like a lot of people are posting what they did, but I stll couldnt see a final answer for some of the questions...
It's a good thing.. Once things will become final, many if us will loose heart..;)
Jokes apart even I want to see final answers.
 

plulutes

New Member
The long run average volatility rate was lower than the current volatility estimate,.....I thereby landed up going for the graph which showed a gradual downward sloping line (based on the mean reversion property).

I calculated omega/gamma weight as being lower than the stated variance and selected the graph that started lower and reverted higher. :0 I can't be sure, but I think I calc. something like 0.000053 something to 0.000055 something. But I didn't calc. an updated variance based on returns and variance, just compared the long run variance in the question to the omega/gamma result.
average exposure was about 67k... I got an answer from the given options for expected loss. then used the formula for unexpected loss which is pretty straightforward and didnt get a proper answer... may be it was a calculation mistake. or was there something tricky that I missed?
 

plulutes

New Member
Adelaide,

I got the EL and got a selected answer just using EL=PD*AE*LGD but don't remember the number now but, UL I remember something like 118 or 180...anyway 1's and 8's. UL=AE * sqrt (variance of LGD*PD + LGD^2 * PD * (1-PD) ) However, the PD *(1-PD) was replaced with EDF^2 that was given. That's what I came up with anyway.
 

Roshan Ramdas

Active Member
I calculated omega/gamma weight as being lower than the stated variance and selected the graph that started lower and reverted higher. :0 I can't be sure, but I think I calc. something like 0.000053 something to 0.000055 something. But I didn't calc. an updated variance based on returns and variance, just compared the long run variance in the question to the omega/gamma result.

Did not see the need of calculating an updated variance.
Omega ( Long run average variance rate * Gamma) was provided
Gamma as you pointed out was calculated using the 1-Alpha-Beta logic
The Long Run Average Variance Rate would then be-> Omega / Gamma
Take a square root of the long run variance rate to arrive at the long run volatility.
Compare the present volatility estimate to the long run volatility rate to arrive at whether there is going to be a +ve or -ve drift.
 

plulutes

New Member
Did not see the need of calculating an updated variance.
Omega ( Long run average variance rate * Gamma) was provided
Gamma as you pointed out was calculated using the 1-Alpha-Beta logic
The Long Run Average Variance Rate would then be-> Omega / Gamma
Take a square root of the long run variance rate to arrive at the long run volatility.
Compare the present volatility estimate to the long run volatility rate to arrive at whether there is going to be a +ve or -ve drift.

I don't remember if we were comparing variances or volatilities, just remember that my comparison figure was .00053 vs. .00055 (something like that). Do those figures ring a bell? If not, I may have missed something.
 

brian.field

Well-Known Member
Subscriber
I felt absolutely terrible after this exam. I am not sure what I was expecting....I would have liked to have left feeling confident but that was definitely not the case. I ran out of time and had to guess on at least 20 questions.....which is very frustrating because I did not anticipate time being a problem, given how quickly I was able to complete my practice exam. We also had the privilege of listening to some type of corporate training session in the conference room next to our testing room; this was particularly unfortunate and distracting.
 

plulutes

New Member
I felt absolutely terrible after this exam. I am not sure what I was expecting....I would have liked to have left feeling confident but that was definitely not the case. I ran out of time and had to guess on at least 20 questions.....which is very frustrating because I did not anticipate time being a problem, given how quickly I was able to complete my practice exam. We also had the privilege of listening to some type of corporate training session in the conference room next to our testing room; this was particularly unfortunate and distracting.

Wow! last thing you needed are some distractions to go with your first attempt at the FRM!! Thats a legit complaint if I've ever heard one. Air conditioning came on in my test room and I got upset!
 

brian.field

Well-Known Member
Subscriber
As an aside, I would love to speak about the exam questions, but it is my understanding that it is a violation of the Code of Ethics....is it not?
 

Adelaide

Member
Adelaide,

I got the EL and got a selected answer just using EL=PD*AE*LGD but don't remember the number now but, UL I remember something like 118 or 180...anyway 1's and 8's. UL=AE * sqrt (variance of LGD*PD + LGD^2 * PD * (1-PD) ) However, the PD *(1-PD) was replaced with EDF^2 that was given. That's what I came up with anyway.
then it was clearly a calculation mistake as everything was given, AE was calculated for the expected loss....too bad
 

plulutes

New Member
As an aside, I would love to speak about the exam questions, but it is my understanding that it is a violation of the Code of Ethics....is it not?

This forum is dedicated to discussing the exam and the questions as we remember them. Never heard we can do that. In fact if this were the case, I think BT would have a problem.
 
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