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FRM Part 2 (November 2014) Exam Feedback

Nicole Seaman

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We hope that everything went well for all of you who took the FRM Part 2 Exam today! We would really like to hear your feedback! How did it go? Did you encounter unexpected questions? Let us know how it went! :)
 
#2
I found it very difficult. Almost 60% questions were unexpected.
Around 7-8 questions were in SCDS which I found difficult. One was on LCR, on leverage ratio and ARACOC. Even MBS and volatility smile questions were very tricky.
GARP practise questions didn't do any justice. I had prepared well still I have doubt on 50% questions.
 
#3
It also had AMA, credit VAR calculation, market var + stressed var, cut off calculation at 95%, one question on MF global, LDA . The questions were not easy to understand & interprete. The given choices were very confusing.
 
#4
I found some item sets quite difficult. I thought that I had review all the AIMs. Many of them use DESCRIBE but sometimes is calculate. Current Issues, just 2 questions? I am sure of 50%. I feel more challenge that the cfa level 2, those item sets.
 

Natalia13

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#5
It was very difficult for me. I solved all BT problems published here but was quiet surprised to see 95% of qualitative questions on the exam. I wish I had spent more time rereading books instead. There was an error on my paper (I think) with finding number of exceptions and given n=2500 instead of 250 and the answer was 35. Also after reviewing what people said about May's exam on this forum, I thought the questions were easy, but November's exam was hard. I felt better after the first part than today.
 
#6
It was very difficult for me. I solved all BT problems published here but was quiet surprised to see 95% of qualitative questions on the exam. I wish I had spent more time rereading books instead. There was an error on my paper (I think) with finding number of exceptions and given n=2500 instead of 250 and the answer was 35. Also after reviewing what people said about May's exam on this forum, I thought the questions were easy, but November's exam was hard. I felt better after the first part than today.
I also think that question has something wrong, the answer seems to be 35, but given the information it cannot be arrived.
 
#7
Same here. Preparing for one more month would not have made any difference.CFA L2 syllabus is voluminous but here the questions were vaguely worded. I thought BT question drills we're very good. There were sufficient qualitative questions but in the exam the focus was on 'best', 'most likely' etc where more than one answer seemed plausible. FRM seems to provide positive surprises to candidates. Hope I will be pleasantly surprised on the result day.
 
#8
It was an incredibly difficult exam. Here is why: I would divide questions into 4 parts,
(1) I have no idea what they are asking because information presented is not concise nor complete. Examples: (a) Giving default probabilities in percentages, and then decimal points (i.e. 0.2 can be interpreted as 0.2% or 2%). (b) Giving VARs but not telling you whether it is a 10 day, or 1 day. (c) Given 50 days of returns, estimate 95% var --> then adding 10 more days and asking what the updated VAR is without specifying whether new period remains 50 or becomes 60. (d) Obscure references to "Level 1" capital, or "1-Step" in Basel. (e) And in general given wall of text full of numbers, ask a totally unrelated question that can be answered without any of the information given.
(2) Answers are so close together that any of them can be true. Example: MF Global question where Corzine banked on European agency to back up soveregn debt. There were *2* almost exact answers! Another one - wrong way risk with choices of Out of Money Puts, or In Money Puts
(3) Focus on obscure topics. 5 freaking questions on Credit Annex Agreement. Only 1 Question on current issues. What seemed to be like 80% focus on market risk, tons on CDS, CDO, ABS and Swaps. Not a single question on exotic options.
(4) Complex, overly difficult compound questions. Some of them had 2 or 3 concepts embedded in them. I have not practiced any that required so much integration of different concepts. Example: Insurance company investing money in cash account, mbs and then trying to hedge interest risk. One of the answers was something about unexpected redemption and needed liquidity?

Anyway I must have guessed on at least 50% of questions (my background: top 10 MBA, passed Cfa level 1, work in Risk management for 10+years). On the up-side i am glad I did not study more, it wouldn't have helped.
 
#9
I selected the followings:(i will disclose as much as i can remember)
1) variance swaps are easy to price.
2)We use internal data for body and distributions to model tail in measuring of loss severity.
3)Cvar came to be 8000
4)Leverage ratio was around 2.94%
5)73% was LCR
6)The Var for HW was higher than HS by 3.8..something for 1 day horizon.
7)RAF should be forward looking and include risk appetite.
8)PO strips have more duration than passthrough from which they are created.
9)I think there was a question on cash account/principal account with mbs/corporate bond..i think i selected that negative convexity of MBS is offset by positive convexity of corporate bond.
10)There was a question on CLN.I think answer was that CLN has a CDS with protection seller paying upfront or something like that.
11)A question on asset allocation where portfolio outperformed the benchmark due to asset allocation.
12)A question on trade repository where i selected that they are to protect unsophisticated investors from cheating.
13)A question on transaction liquidity where i selected the 1st option.
14)A question on WWR where i selected that OTM puts have higher WWR if purchased from oil producer.
15)Differnce between current and past market risk charges including SVAR/VAR i think the answer was 320.
16)Araroc where project should be rejected.
17)A question on minimum intrest for Raraoc where i selected 5%
18)Graph of IO strip..i think it should be D as interst component decreases over time.
19)A question where we had to use montecarlo to value MBS.
20)Diff between OAS/NS/ZS.
21)a question on EL where i think the answer was 60.
22)A question on tranches where the money paid to equity tranch was 0.
23)Hedge fund has high sharpe ratio than DJSI index.
24)Q stat was significant for a fund hence there was liquidity risk and perhaps data smoothing was done.
25)A question on versik model where i selected that they use long term value of short term interest rates.
26)A question on convertible bond arbitrage..where it selected liquidity permium as a source of return.
27)Ban on naked SCDS will induce iliquidity and less price information.
28)PFE for Int swap with unequal payments.
29)A question on CRA where i think the answer was economic return on collateral.
30)Few questions on CSA where stronger party will want one CSA ......
31)A question where answer would be weighted avg of betas.
32)A question on model calibration risk where wrong model was used to value derivatives..ie delta normal was used.
33)A question on volatality smrik kind of diagram where delta was greater than .5.
34)A question on long/short equity..
35)Housing market is procyclical so extra protection are required by banks during economic downturns.
36)SAR decreases with decreasing interest rates.
37)Declining transaction cost impacts dispersion.
38)A question on performance attribution.
39)A question on LDA where it was told that lognormal should be used for severity always as per basels and i thought it was false..as basel never says to use lognormal for severity...
40)A question on holee model..i am not sure about the answer.
41)risky debt=rf-put
42)finding var usiing BRW or hybrid..i can't remember but the answer was 6.8 something.
43)AMA wants scenario analysis to be included to model capital ..
44)A easy question on finding the RWA.
45)Solvency vs Basel..i think i got it correct.
46)question on ir/trenor/sharpe..
47)A question on netting where the answer should be payment netting between for wards.
48)A question where the answer would be buying of SCDS to protect against soverign risk.
49)A question where answer will be that changes in reference rate may impact monetary policy beyond boundaries or something like that...
50)As default corre;ation increases VAR from senior tranches will increase dramatically as tail risk will increase..
51)Question on backtesting where answer seems to be 35.
52)Lock in period of 18 for hedge fund will cause harm.
53)Where you don't need to rely on qualitative aspects only??1)Consumer 2)Financial 3)Non financial 4)Soverign...i think it is Consumer..
54)Why do we need trade repositories..i think i selected to prevent unsophisticated investors..but now i think the answer should be to reduce concentrations..
55)
.I think it was which has biggest intrest rate risk or something and i selected MBS and certificates of deposit..

56)Ya got it MBS2 YC 2...I they had biggest difference between nominal and zspread.
YC2 had steeper slope so more differnce between Z spread and Nominal spread.
57)quantile standard errors - I selected asymmetric confidence intervals
58)facts pertaining to bootstrap, age weighted & volatility weighted HS
59)The analyst may face problem to model balancesheet composition..
60)Excess return/mvar1=excess return2/mvar2...is optimim,,
61)Undiversified Var is the upper bound..

62)One more.. they gave the distribution of market, credit, op, firmwide. Investigators found something strange about a distribution.. Not sure of the answer i picked firmwide which is described as very close to normal.. want to hear your thoughts

I knew the holee model question and few other but did silly mistakes on them due to time constraint and confusing wordings presented by GARP/
thats all i can remember for now...over all i think the paper was tough....i was unable to understand most questions and had to make educated guesses most of the time.
 
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#10
The paper was extremely difficult. What GARP seems to have done is to place the entire weight of the 80 mark exam on every topic that has gone untested in the last few years and on newly introduced chapters as well.
Without exaggeration,.....the topics covered in GARP's sample exams over the last 5 years and end of the book questions barely received around 10 - 15 % of the exam weight (if not lesser).
 

Tanya Vasileva

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#13
I've remembered a question about the difference between the Nominal & Z-spread - I think I got Yield Curve 2 & MBS 1
For 5) 73% was LCR - I think the amount given for Level 2A assets staited that the haircut was already applied ....
 
#14
I've remembered a question about the difference between the Nominal & Z-spread - I think I got Yield Curve 2 & MBS 1
For 5) 73% was LCR - I think the amount given for Level 2A assets staited that the haircut was already applied ....
Hi Tanya - Are you sure that there was mention about the haircut already being applied to the level 2A ??
I did perform the 40% check on the Level 2A assets but forgot to account for the haircut and landed up using the Level 1+Level 2A in the numerator. My answer should still be correct if the Level 2A figure already contained the haircut.
 

OL

New Member
#16
I've remembered a question about the difference between the Nominal & Z-spread - I think I got Yield Curve 2 & MBS 1
For 5) 73% was LCR - I think the amount given for Level 2A assets staited that the haircut was already applied ....

I think LCR question is 73% since basically it cant be more than 75%
 
#18
Hi Nicole/David,

Based on your experience, do you always get this kind of "very Difficult" feedback from students or are we a "bunch of ill prepared losers"
 
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