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!
There were a couple of esoteric qualitative questions and some ambiguity (at least from my point of view, maybe it was clear from wherever it appears in the study guide) about the sign convention for delta of a put (referring to the question asking for directional movements of option deltas in the case of the spot falling from (you had to compute it) 24 to 18; clearly the atm call delta decreases here, but technically so does the put's delta, yet almost anyone would say it increases as it's magnitude does).
Apart from that, I thought the exam was rather trivial, at least far easier than my expectations based on the comments from the last exam in June.
There were a couple of esoteric qualitative questions and some ambiguity (at least from my point of view, maybe it was clear from wherever it appears in the study guide) about the sign convention for delta of a put (referring to the question asking for directional movements of option deltas in the case of the spot falling from (you had to compute it) 24 to 18; clearly the atm call delta decreases here, but technically so does the put's delta, yet almost anyone would say it increases as it's magnitude does).
Apart from that, I thought the exam was rather trivial, at least far easier than my expectations based on the comments from the last exam in June.
My guess of a safe score would be 50/80 considering the fact that 50% of the test takers pass and achieving 60% which is 48 is competitive. What do you guys think?
39. Competitor bank increase deposit rates. what if we do not increase [ LCR  unchanged ]
If passing grades are based off the best scores then...
If I look at the May 2015 thread and see the number of people that went through the exam with relative easy, I expect that the passing requirements would be higher.
I feel that the pool of candidates attending the Part II exam are going to get much better grades, thus making it more competitive to make the cut for two reasons:
1) The pool of candidates for P1 was also filled with people that were clueless which I assume would make it easier to pass. (We had someone show up for the exam with no calculator, and a few that left after 15 min.)
2) They were in the top 40% in the P1 Exam  I would assume they are more serious, and it could also be people attempting the exam for a second time.
@ asultani Lets hope for the best. We were a small group of around 5 people taking the exam and that 50/80 is based on the small sample. Could be we were a bunch of underprepared lot.
 RAROC given orginal RAROC 14%, the elements, RAROC hurdle 9.5%, what cases make RAROC decrease below hurdlge (increase % operating expenses, expected lost, economic capital require). This one I did not have time to compute RAROC each case, just choose economic capital which have biggest dollar value change. How you guys did it?

Sure? Net Cash Outflow changes
Yes, i thought about that too, and you are correct from an LCR denumerator point of view. However, there was no information on where the bank would get the funds to pay out deposits, i.e. what the impact on HQLA is. Sure you can reasonably assume it's from HQLA with 0% haircut (cash, ECB reserves...) but the question said something like "without further information". Furthermore, from experience, an increase in deposit rates from competitors doesn't necessarily imply deposit outflows from your bank, they can be quite price inelastic. So, "without further information", i also went for the LCR unchanged, by elimination of the other options. Not fully confident on this one though, I guess it can be debated.
The paper was definitely not easy though it appeared so in patches because of a few sitters. My analysis is 30% sitters, around 30% difficult and around 40% between 2 choices which has been the usual pattern in FRM Part 2.
List of questions i remember [ some may be a repetition of earlier posts] . Have posted the answers in bracket which i have marked. [ Spent too much time on some questions and had to guess around 10+ questions blindly so some of my answers would soud wierd but will help you guys remember the questions .]
1. Expected shortfall [ 2.2% ]
2. RAROC which will decrease to less than 9.5%[ increasing the deposit rates by 2% on 650 million as the loan was fully funded by deposits]
3. OIS 4/4.5%  LIBOR 5% [ 1100  guess]
4. A graph between 1netting /positions on Y and Xaxis [ i chose b which was increasing lognormally and then constant]
5.Surplus  Asset100 r=10% , Liability=80  cost of funds 8% [ 3.6% though i feel ans would be somthing else ]
6.How would the amount be distributed Senior/Equity/Mezannine  [ i chose the one where equity was wiped off ]
7. Reducing moral hazard [let the originator retain some stake ]
8. Portfolio Var 16 m27%/8m20% where 8 m is shifted from A to B [ randomly guessed b]
9. Credit Var  expected 28 defaults with 95% confidence and 1000 bonds with expected loss = 2 % [ 8000]
10.Inflow of CAD/Outflow of Euro
11. Reduce the risk of portfolio by [ by taking MVar]
12. Calculate LVar . P= 1.75 m , s=2.5% , meaan =1% etc [ chose b  exogenous + a number]
13.FrequencySeverity [ Poisson/Lognormal]
14. Calculate daily VaR @ 99% , annual volatility given, mean return =6% etc [ chose b ]
15.PD=7% constant. PD in 3 years ? [ 20%]
16. Call Put Delta [ Call delta decrease , put delta increase ]
17. SVaR  increase in capital requirement [ 330 m ]
18. Mapping of fcators  principal + interest etc [ dont remember ]
19. PCA  90% / 10 positions/ 70%/7% [ dont remeber ]
20. HFT  justification for reducing latency. [ price may move away ]
21. portfolio manager  + ve intercept and higher slope [ statistically not significant and greater beta]
22. 250 days / 95% VaR  8.4 exceptions [ Reject since statistically not significant  lies outside ]
23. Risk Budgeting 800 m A and B IR was given [ chose b ]
24. POT threshold [ high enough to be significant and low enough to capture enough data points]
25. Backtesting  12 execptions in 250 days at 95% VaR .. what can we conclude [ dont remember ]
26. Copula [ VaR ]
27. Jensen inequality [ chose b  i think 86bps]
28. Why FI cannot be valued by BSM [ price change in bond ]
29. Internal Control  [ dont remember]
30. Cybersecurity  [ proactively share the data]
31. Model risk
32. RAAF
33. Alpha, Beta , Gamma [ Beta will face funding risk ]
34. China Bank 3 questions [ dont remember ]
35. CVA [ dont remember ]
36. Netting [ dont remember ]
37. Securitization [ dont remember ]
38. WWR [ dont remember ]
39. Competitor bank increase deposit rates. what if we do not increase [ LCR  unchanged ]
40. Historical simulation which is not an assumption? [ Normal distribution ]
Will post more when i remember.
My guess of a safe score would be 50/80 considering the fact that 50% of the test takers pass and achieving 60% which is 48 is competitive. What do you guys think?