Level 1: Post what you can remember here

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

  1. BioNerd

    BioNerd New Member

    what about the KPI one?
  2. Aleksander Hansen

    Aleksander Hansen Well-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. BioNerd

    BioNerd New Member

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

    BioNerd New Member

    agree on this one
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  5. cidare

    cidare New 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. browniandynamics

    browniandynamics New 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 Hansen

    Aleksander Hansen Well-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. browniandynamics

    browniandynamics New 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. BioNerd

    BioNerd New 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 Hansen

    Aleksander Hansen Well-Known Member

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

    browniandynamics New Member

    Hi Aleksander, thanks for clarifying!
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  12. Aleksander Hansen

    Aleksander Hansen Well-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. ArbitUP

    ArbitUP Member

    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


    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. Tom77

    Tom77 New Member

    There was also a question about the Jensen`s Alpha and a given Regression. Actually i can`t remember what it was all about...
  15. varun34by02

    varun34by02 Member

    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. varun34by02

    varun34by02 Member

    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. varun34by02

    varun34by02 Member

    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. Frm_Indonesia

    Frm_Indonesia New 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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  19. varun34by02

    varun34by02 Member

    S=K=650 asked dividend..rt ? i think answer was 10.

    Smoothing I think 0.91.....but that was approx ( options were too close - 0.90/91/92/93)
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  20. BioNerd

    BioNerd New Member

    0.91 sounds like what I got too

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