# Level 1: Post what you can remember here

Discussion in 'About FRM' started by browniandynamics, May 21, 2012.

2. ### Aleksander HansenWell-Known Member

Reducing from 99% to 95% increases the probability of making a Type 1 Error, but decreases the Probability of making a Type 2 Error.

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3. ### BioNerdNew Member

oh just saw your reply. yes, ROE is the only performance indicator there.

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4. ### BioNerdNew Member

agree on this one

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5. ### cidareNew Member

I think the answer for the question about Key Performance Indicators was ROI. But i don't remember the other choices.
There was another question about delta. I remember the choices are option, futures and forward. I chose forward. Anyone remembers?

In MCS question, we were required to imply the corresponding z score for 0.45, as i remembered.

Another question about omitted variables bias occurence.

Straight ESS, TSS and R^2 question.

6. ### browniandynamicsNew Member

Hi varun34by02, thanks for reminding the Type I/II error question. As I can recall now, it stated that when the significance level increase from 1% to 5% and the sample size increase from 100 to 200, how Type I and Type II errors would change?

The answers are some combinations of I/II increase/decrease, and I think I chose Type I increase and Type II decrease.

7. ### Aleksander HansenWell-Known Member

ROI was not an option

Yes, omitted variable bias;
as well as perfect multicolliniarity (messing up your OLS by dividing by zero)

8. ### browniandynamicsNew Member

I think this question is a hard one and honestly I don't know which answer is right, so I guessed: the relative trading balance.

9. ### BioNerdNew Member

there is also a question on Basel 2 recommendation for stress testing. one is encourage open discussion; one is manager's signoff before sent senior manager's review. forgot other options.

10. ### Aleksander HansenWell-Known Member

It is directly related to the law of one price and hence inflation.

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11. ### browniandynamicsNew Member

Hi Aleksander, thanks for clarifying!

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12. ### Aleksander HansenWell-Known Member

Indeed, this was the only question I guessed on the exam as the answers/text is too politically correct, and often subjective (in my view).
I guessed "encourage open discussion" as it sounded most politically correct but I have no idea. If anyone knows the answer, do let me know.

13. ### ArbitUPMember

It was ROE, STDev, couple others. I think I picked StDev. Wasn't really sure. I initially thought ROE, but that didn't really make sense given it was a risk exam. And passively paying attention to ROE didn't make much sense in that context. I picked StDev, given it is directly related to actual performance and it has to do with risk. Definitely wasn't confident.

PPP: Inflation

Perf Multi

T-Test

The question about the credit quality you just had to add them up if I recall. It was an A, I think +

Inc Type 1, Decrease Type 2

The Weight of the VL, is just the gamma: 1-A-B

CTD: I think we just had the quoted and the CF, divide them? And go with lowest?

Yeah full Z. Used it a couple times...

14. ### Tom77New Member

There was also a question about the Jensens Alpha and a given Regression. Actually i cant remember what it was all about...

15. ### varun34by02Member

yes with just significance level dec thats a sitter.. but you know .. i started getting confused by seeing doubling of 'N' .. still wnet with T1 up & T2 Down

16. ### varun34by02Member

As i Said in some of my last reply....I derived it on the basis of real rate = nominal-inflation and real being a function in IRP, so it is Inflation in different countries that actully drives the IRP !

17. ### varun34by02Member

This one was quite complex .. the Y-axis had excess portfolio return given..but i could not crack it very good question i must say.. such questions only differentiate classes from masses !!

18. ### StruggleNew Member

There were also questions :
- Implied Volatility
- Present Value Dividend with S = K = 650
- Smoothing lamba of EWMA equation
- Role of financial institution

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