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# Exam FeedbackNovember 2015 Part 1 FRM Exam Feedback

#### Nicole Seaman

Staff member
Subscriber
We hope that everything went well for all of you who took the FRM Part 1 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!

#### The Great Khan

##### New Member
Subscriber
Felt somewhat easy although that makes me nervous...

no BSM at all, only one binomial pricing question (just wanted the probability of up move).

A very large part was qualitative.

There was one question about copulas and another where the two possible answers were two measures that I've never even heard of, had to totally guess on those.

One tricky question about calculating VaR on a delta neutral portfolio using the delta normal method which was the only question I had to change my answer to, as it took a double take to realize that this meant that VaR is zero! Can anyone confirm that this is correct?

#### S666

##### Member
Subscriber
I can confirm that I chose a delta normal VaR of zero also for that answer as the options portfolio was both delta and gamma neutral.

#### Bala S

##### New Member
Exam was easier than expected and most of the question are simple and formula based .

#### red_star_in_the_sky

##### New Member
I believe that the Nov exam is easier compared to that in May. This mean that we need a higher score to pass.

Do you estimate how many questions that we need to pass in this time?

#### Maged

##### Member
Most of feedback here & even in some other forums stating that Exam was easy. For me, i saw it as a very hard exam. I just covered 90 out of 100 Qs in 4h time.
Best of luck to all

#### Malefane Molibeli

##### New Member
Subscriber
Most questions were qualitative and tricky. Calculations were not too bad, with numbers per the calculator screen agreeing with one of the options. I found delta hedging a bit tricky and fixed income had only few calculations.

For some questions like the CAPM where we were required to calculate the Er with beta = 0.66, I was left with less time and had to apply interpolation and decided on the expected return number lying between the 7% and 11%.

the IRP question applying the (1+ rquote)/(1+ r base)* S = F gave me some doubts but the I resorted to the F = S*exp(r - rf).

I chose the student t instead of Gaussian as a copula reliable for tail dependence.

I am just hoping that we all make it and looking forward to the challenges of PART II.
I am only holding thumbs for everyone and hoping that GARP does not commit a TYPE I ERROR!!

#### S666

##### Member
Subscriber
For what it's worth I chose the Students T instead of Gaussian copula for Heavy tail dependence too.

Also used the F = S*exp(r - rf) and found the correct answer for the forward exchange rate question.

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#### mishrasa

##### New Member
I would expect 50-60 questions correct(including the probability of a correct guess). I am still happy with this given the fact that i started studying for the exam just 5 days before.

Not sure if i am the only one with this question, but does anyone know how would the exam be graded. I know its on a quantile basis, but what does the population form of? All of the candidates??

#### besem

##### New Member
Eep. The exam started really badly for me - of the first 7 questions, I left 4 blank... :/

I banked on the maths questions to do well, and there were hardly any of them. :/ I finished with about 3 minutes or so to spare; just enough time to guess the questions I had left out.

#### waterdancer

##### New Member
Subscriber
So my exam process started pretty terribly - between construction traffic (at 6:30 am in the morning!) to impossible parking (I guess it's a given for SF), and cap it all off being written up for a VIOLATION 1 minute into the exam because I have pencil sharpner and ear plugs on the desk even though I double and triple checked that I can bring them on GARP website the night before. I asked whether my exam would be graded, because if it wasn't, I ain't gonna sit through 4 hours of exam.

I don't know how it is for other candidates in other locations, of everything GARP said we can bring, our proctor made a point that nothing can be seen on the desk or in the bag underneath your seat. Even calculators with calculator covers have to be confiscated (which they announced during the exam and not before). There were also confusion about exam site code and ERP vs. FRM booklets.

The exam questions seem more straight forward than BT questions - lots of GARCH and EWMA,, and OLS questions (not to calculate but more qualitative). Lots of delta/hedge and duration hedges (which sadly was few topics I didn't cover in details). Other topics include throwaways like 5-6 risk management appetite, CEO/CRO/Board duties and data quality, 1 ethics, 1-2 financial disasters questions, 1-2 mortgage payments question, qualitative questions about term structures, a few FRAs, more CAPM and options Greek questions than I expected. I don't recall any BSM but cost and carry questions.

My recap might not be fully comprehensive or reflective of the whole exam as I ran out of time in the end given the initial debacles ...

#### bil8

##### New Member
I had a mix feeling about the questions..I felt first 50 questions were difficult but later on it was on par level... i felt qualitative questions were difficult ..They were not straight forward at all.....Secondly there were few questions i wasnt able to solve 1. OLS Last question of calculation 2. Then Var of delta and Gamma Neutral...As some people above said it was zero but how can VAR Be Zero 3 Another VAR Question where we were given Call option value along with stock and strike price ( i dont know which value to use to find the answer the call option or stock price )... 4 Another American Put option question with dividend given ( do we need to add the value of dividend to find ans as put value increases with dividend announcement )......Do let me know ur thoughts

#### vmircea81

##### New Member
Hi everyone. The exam seemed easier than expected for me, too, especially considering the testimonials from previous exams. Majority of the questions in line with the GARP practice questions difficulty. Probably around 10-15 questions slightly harder. Even these ones were on par with the average Bionic Turtle practice questions. I expect a score of 90, with a WCS of 85 . Good luck to everyone!
Please find below what I remember from the exam:
- 2 q on using garch and ewma to update covariance and volatility
- 1 q on binominal - find the probability of upmove
- 1 q on data accuracy
- several questions on futures : 2 for hedging with futures, 1 for future calculation, 1 for crack spread
- 1 q on swap valuation (easy calculation)
- 2 q on expected shortfall (easy calculation)
- 5-6 q on ratings - country ratings, bond ratings internal/external ratings
- 2 q on probabilities using bayes
- 1 q on probabilities (simple form: what is P(A/B)?, easily deducted from P(AB)/P(B) )
- 2 q for calculating probabilities (used Poisson on one)
- 4-5 q on capm, sortino, sharpe, apt
- 1 q on erm
- 2 q on risk appetite framework
- 1 q on gini coeficient
- 4-5 q for options - more qualitative/situational than computational. The computational one involved calculating the lower bound for a put on a dividend paying stock
- 1 q on ES being sub-additive and VaR not
- 2 q on fx risk - one on fwd rate and one in which a bank's fx pos is affected by the fx move (both easy)
- 3-4 q on calculating Var using delta normal; one in particular : if an option position is both delta and gamma neutral, what is VaR using delta normal method? Answered zero
- 1 q on financial disaster. For the question on AIB and Barings similarities, chose employees speculating back-office loopholes
- 1 q regarding conduct code (easy)
- 1 q for calculating a monthly prepayment amt given CPR and outstanding amt and amount due within the month
- 1 q regarding lessons learned from 2007 credit crisis.
- 2 q on simple regression : one for calculating R squared and interpreting it and one to calculate b0 and b1
- 1 q on copulas. Also chose "student copula"
- 1 q regarding a distribution : skew and excess kurtosis given.
- 2 q regarding confidence intervals
- 1 q for calculating fwd rate
- 1 q for calculating swap rate given discount
- 1 q on fwd rate adjustment from eurodollar futures minus vol adj
- 1 q on expected loss calculation
- 1 q on unexpected loss calculation given that PD rises from 1% to 2%
- 1 q on probability of default for a certain rating category of bonds in 2y, given a defaulting path
- the rest - other qualitative type questions (operational, market, credit risk, ewma/garch among the issues)

#### Moey

##### Member
S666, vmircea81: I'm impressed at both your recall of the exam - kudos! Very helpful and thanks for the detail.

By any chance, was the highest information ratio the same as the highest sharpe ratio, over the threshold? Unfortunately in my haste I skipped the small information ratio part. Probably not - pains me to get this question wrong. :/

Re the AIB / barings question - I don't think "fake client accounts" was right; vmircea81's "back-office loopholes" seems better although I forget the detailed answer myself.

Good luck everyone!

#### Numerical Wizard

##### New Member
Subscriber
@mishrasa
The population includes all the candidates who have taken the respective exam on that particular day.
So if you have taken the FRM Part I Exam, all the candidates who have taken the FRM Part I exam on the same day will be in the population.
Then GARP will assign a quartile ranking for each of the four subject areas to each candidate (Foundations of Risk Management, Quantitative Analysis, Financial Markets and Products, Valuation and Risk Models).

I would expect 50-60 questions correct(including the probability of a correct guess). I am still happy with this given the fact that i started studying for the exam just 5 days before.

Not sure if i am the only one with this question, but does anyone know how would the exam be graded. I know its on a quantile basis, but what does the population form of? All of the candidates??

#### mishrasa

##### New Member
@mishrasa
The population includes all the candidates who have taken the respective exam on that particular day.
So if you have taken the FRM Part I Exam, all the candidates who have taken the FRM Part I exam on the same day will be in the population.
Then GARP will assign a quartile ranking for each of the four subject areas to each candidate (Foundations of Risk Management, Quantitative Analysis, Financial Markets and Products, Valuation and Risk Models).
Thanks @Numerical Wizard
Do you think i stand a chance with a score of 50-60?

#### aof

##### New Member
S666, vmircea81: I'm impressed at both your recall of the exam - kudos! Very helpful and thanks for the detail.

By any chance, was the highest information ratio the same as the highest sharpe ratio, over the threshold? Unfortunately in my haste I skipped the small information ratio part. Probably not - pains me to get this question wrong. :/

Re the AIB / barings question - I don't think "fake client accounts" was right; vmircea81's "back-office loopholes" seems better although I forget the detailed answer myself.

Good luck everyone!

For IR- sharpe ratio
If I remember correctly, it's not the same one.

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#### vmircea81

##### New Member
S666, vmircea81: I'm impressed at both your recall of the exam - kudos! Very helpful and thanks for the detail.

By any chance, was the highest information ratio the same as the highest sharpe ratio, over the threshold? Unfortunately in my haste I skipped the small information ratio part. Probably not - pains me to get this question wrong. :/

Re the AIB / barings question - I don't think "fake client accounts" was right; vmircea81's "back-office loopholes" seems better although I forget the detailed answer myself.

Good luck everyone!

Hi Moey,

Your welcome. Before taking the exam, I promised I would try to remember as much as possible and share it on the bionicturtle forum in order for other "would be" candidates to have an idea of what to expect, exactly they way I benefited from others sharing their impressions and questions they remembered.

As for the question on IR & Sharpe ratios: I first calculated the Information ratio and only two of the funds had a ratio higher than 35% (required minimum). I calculated the Sharpe ratio only for these two, so I cannot say that that fund had the highest level for both ratios.

#### Numerical Wizard

##### New Member
Subscriber
@aof @Moey

I agree with aof regarding the question on the Sharpe and Information Ratio.
According to my calculations, the portfolio with the highest sharpe ratio did not fulfill the criterion regarding the information ratio threshold.
The portfolio with the second highest sharpe ratio did fulfill the criterion regarding the information ratio IIRC.

For IR- sharpe ratio
If I remember correctly, it's not the same one.
AIB-Baring should be 'back office'

#### Numerical Wizard

##### New Member
Subscriber
@mishrasa

I think that you do have a chance of passing with 50 - 60%!
There are a couple of people who only studied one week for the Part I Exam and then they passed, even with a quite good quartile ranking.
In any case, I wish you the best of luck and will keep my fingers crossed for all of us for January 5th!

Thanks @Numerical Wizard
Do you think i stand a chance with a score of 50-60?

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