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Exam Feedback May 2018 Part 1 Exam Feedback

pranay1986

New Member
Also one more on firm having GBP equivalent asset of 200 mil USD what is the gain when spot rates change i was getting gain around 31.4 mil not sure whether its right

One on option contract for Copper price. Now of 3.17 strike of 2.25 price after months of 2.95 what is the profit on option i marked 0. Not sure whether i remember correct qns
 

Utkarsh180992

New Member
There was one question on operational risk UL calculation EA was 80 mil recovery rate was 67% and probability of Default was 12%. i think none of the option was correct, did anyone else faced same issue ??
 

nikic

Active Member
There was one question on operational risk UL calculation EA was 80 mil recovery rate was 67% and probability of Default was 12%. i think none of the option was correct, did anyone else faced same issue ??

For this question the variance of the pd is pd * [1-pd]. I got an answer that matched.
 

nikic

Active Member
Some questions i remember about information criterion with best consistency answer was SIC

expection of jump on both sides for a security which is the best spread to apply to capture volatility using puts
I marked long butterfly answer is i think is short butterfly

One question on difference between future and OTC contract

Operationl risk allocation

One on korean bank recieving AUD dollars best hedge to prevent some risk but also gain if its in favour i marked long put

Do you remember the questioned for the futures and operational risk allocation? What were the answers? I'm hazy.

For the put options, I need the exact question again to worksend out my answer.
 

pranay1986

New Member
Do you remember the questioned for the futures and operational risk allocation? What were the answers? I'm hazy.

For the put options, I need the exact question again to worksend out my answer.
Dont remember the OTC answer statement but maybe it was D

For operational risk allocation i marked case where the business units doing good and making profit are allocated less capital
 

nikic

Active Member
What's the difficulty of this paper compared to previous sittings?

What would an estimated passing mark be like? Would 60++ be enough?
 

flex

Member
Also one more on firm having GBP equivalent asset of 200 mil USD what is the gain when spot rates change i was getting gain around 31.4 mil not sure whether its right
hi, @pranay1986

was it the qstn where 'cable' rise to 1.6 from 1.4 (ROA ir=about 5%) & balance-curr = USD (with funding ir=2% )? i had answ matching problems, don't forget what's marked.

i except true answ is ab USD 30+ mn
Goodluck, flex
 
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Dotun

New Member
For this question the variance of the pd is pd * [1-pd]. I got an answer that matched.
I had the same problem as @nikic and my answer didn't match. Had to move on after wasting like 4-5mins . Seems I got it wrong since you found a correct answer.
 
I just firstly want to say thanks very much to the Bionic Turtle team - the revision material is exactly the kind of thing that I study best with. The number of practice questions made sure there wasn't a part of the study material which was overlooked and I felt pretty prepared going into the exam. Also the forum threads per practise question is genius to have further discussion and pick up extra tips and tricks. So thanks very much - hopefully I've done enough to be another statistic on your pass success rate.

When I opened up the exam I had no clue on the first question and was a bit panicked that this was going to be the same for every question. I also panicked at the 30min mark when I thought for a good while that I should have been up to the 25th question. Fortunately my brain relaxed into it. I thought the exam was fair.

Someone already mentioned the sharpe ratio question and I was also confused that I couldn't get the right answer - covariance of 0.00096 for each portfolio is all that I can remember then trying to derive the correlation to find the portfolio std dev in order to find the total sharpe ratio. I remember guessing A. 1.2.

In total I might have guessed about 8 - 10 questions that includes some questions which I knew how to do but just felt I was going to spend too long getting to the answer. I managed to get to the 100th question in doing so.

The top tips I found were to find out all the functions that your calculator does ahead of the exam. Someone in this forum mentioned the BOND function which is a genius time saver for the exam (although I appreciate the message from BT to learn the technique from scratch for complete understanding. The ICONV helped in the exam to save me a minute or so - the nCr was one I wasn't aware of when I started studying but also is going to save time. The STAT function can also help for checking std dev, corr and mean values.

This was actually my second time taking the test - I was with Kaplan the first time. I felt like the FRM was to something to be intimidated by in November and that Kaplan was giving you materials to get you over the line of the exam. I really appreciate that BT tried to teach an understanding of the concepts in a way that makes the FRM content seem accessible and doable!. Now I am actually a bit grateful that I failed in November since I now feel like I have a good knowledge of a lot of the concepts - regardless if I was able to show that on exam day or not!
 

iagopp

New Member
I remember one which I couldn't find an answer. I do not remember it very clearly.

The average of something is 2 errors per quarter (i assume 3 months). What is the probability of exactly 2 errors in 250 days

Maybe someone can improve my question.

I tried to calculate 250! for a poisson distribution but the calculator did not work.
 

IB_frm

New Member
When I opened up the exam I had no clue on the first question and was a bit panicked that this was going to be the same for every question. I also panicked at the 30min mark when I thought for a good while that I should have been up to the 25th question. Fortunately my brain relaxed into it. I thought the exam was fair.

Someone already mentioned the sharpe ratio question and I was also confused that I couldn't get the right answer - covariance of 0.00096 for each portfolio is all that I can remember then trying to derive the correlation to find the portfolio std dev in order to find the total sharpe ratio. I remember guessing A. 1.2.

In total I might have guessed about 8 - 10 questions that includes some questions which I knew how to do but just felt I was going to spend too long getting to the answer. I managed to get to the 100th question in doing so.


I actually had the same irritation at the 30min mark - I think I was at question 17 or 18 (and I had left 1 or 2 blank for some further thoughts or educated guess towards the end) and was like damn I'm way behind...trying to rush...for like 2 questions until my brain realized I'm ok with the timing...
Overall I think the exam was quite fair even though I made a few educated guesses as well ...even without being native speaker it's been ok to get through the questions (like not too much irrelevant text to read like it's been the case in some practice exams)..I think I've been at question 100 before the 3 hour mark, so enough time to take a closer look at those questions that I left blank in the first run...Still ended with some guesses - but I'll hope the best for end June
 

nikic

Active Member
I remember one which I couldn't find an answer. I do not remember it very clearly.

The average of something is 2 errors per quarter (i assume 3 months). What is the probability of exactly 2 errors in 250 days

Maybe someone can improve my question.

I tried to calculate 250! for a poisson distribution but the calculator did not work.

Are you mixing up two different questions? There was one question for Poisson. 2 errors in three months. Calculate probability of exactly three errors in nine months. Or something to that effect. Lambda is 6 in this case. Straightforward computation thereafter.

There was another question for 3 excedences in past 250 days at 99%var. I'm not sure but I think the answer is 250C3 * 0.01^3 * 0.99^270
 

flex

Member
There was another question for 3 excedences in past 250 days at 99%var. I'm not sure but I think the answer is 250C3 * 0.01^3 * 0.99^270

i think it was typical Poisson-law task, where lamda (i.e int/freq)=.01 (avg=2.5) -> p(k==3) := [e^-(.01*250)]*(.01*250)^3/[3!]=.2137. correct me if i'm mistake,
Goodluck, flex
 
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nikic

Active Member
There was a question that seemed to be as follows (the numbers are wrong but the idea is the same, I think):

There are three grades of bonds. AA, BB and C. P(default) for each of them is 0.1, 0.25 and 0.4. If a bond defaults, what is the probability that it is a BB or C bond?

The way I calculated it was as such: (0.25+0.4)/(0.1+0.25+0.4).

Please correct me if I am wrong. Also please correct me if I am remembering the question wrongly.

------------------------

Another question on margin requirement. I got the loss on Day 1 as 54,000. As the initial margin is 8000*4 = 32,000, this meant the balance at the end of Day 1 was 32,000 - 54,000 = -22,000.

What is the answer for the status of the account on Day 2? I put it as a variation margin of 54,000...is that correct?

-----------------------

There was a question on hedging with DV01. I can't recall which I used as the denominator, but I got a hedge ratio of 0.5, therefore half the amount of the current position required to hedge. In my case, I believe the current position was 48mil and so the hedge amount was 24mil (could be wrong with the figures but this is the idea).

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There was a question to find the std dev and covariance of returns of three data that were provided. I used the formula as SUM[(X - Xbar)*(Y - Ybar)]/(N-1) for the covariance and a similar formula for the std dev. I know the answer I got was 0.04 for std dev and 0.0016 for covariance. However, the other answer was 0.03 for std dev and 0.11 for covariance. For this question, was the denominator for the std dev and covariance just supposed to be N or N-1? In my case I took it as N-1 but am not certain about it.
 
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There was a question that seemed to be as follows (the numbers are wrong but the idea is the same, I think):

There are three grades of bonds. AA, BB and C. P(default) for each of them is 0.1, 0.25 and 0.4. If a bond defaults, what is the probability that it is a BB or C bond?

The way I calculated it was as such: (0.25+0.4)/(0.1+0.25+0.4).

Please correct me if I am wrong. Also please correct me if I am remembering the question wrongly.

------------------------

Another question on margin requirement. I got the loss on Day 1 as 54,000. As the initial margin is 8000*4 = 32,000, this meant the balance at the end of Day 1 was 32,000 - 54,000 = -22,000.

What is the answer for the status of the account on Day 2? I put it as a variation margin of 54,000...is that correct?

-----------------------

There was a question on hedging with DV01. I can't recall which I used as the denominator, but I got a hedge ratio of 0.5, therefore half the amount of the current position required to hedge. In my case, I believe the current position was 48mil and so the hedge amount was 24mil (could be wrong with the figures but this is the idea).

-----------------------

There was a question to find the std dev and covariance of returns of three data that were provided. I used the formula as SUM[(X - Xbar)*(Y - Ybar)]/(N-1) for the covariance and a similar formula for the std dev. I know the answer I got was 0.04 for std dev and 0.0016 for covariance. However, the other answer was 0.03 for std dev and 0.11 for covariance. For this question, was the denominator for the std dev and covariance just supposed to be N or N-1? In my case I took it as N-1 but am not certain about it.

For first, i did the same think 80% was the answer.
For two, i marked 0 i think.
For DV01 i have the same (i did dv01/dv02)*market value...
 

pranay1986

New Member
Are you mixing up two different questions? There was one question for Poisson. 2 errors in three months. Calculate probability of exactly three errors in nine months. Or something to that effect. Lambda is 6 in this case. Straightforward computation thereafter.

There was another question for 3 excedences in past 250 days at 99%var. I'm not sure but I think the answer is 250C3 * 0.01^3 * 0.99^270
Mistake here i took p = 0.99 and 1-p as 0.01
 
You might have used the rr instead of 1-rr

yes, PD*EAD* LGD (1-recovery value).... that´s expected value

I remember one of rerunning a previous sample or something like that, answers were antithetic, control variates or bootstrapping. I put bootstrapping as the correct one. ¿any feedback?
 
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