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Exam Feedback November 2015 Part 2 FRM Exam Feedback

chouchouc

Member
I don't agree with J0_...the exam was not that easy... it was very difficult. Most of the questions were qualitative. The exam was NOT diversified. Many topics were not tested such as Tuchman (interest rate theories), Correlation Modeling, Merton Models...and many.
In some cases, we got 3 question from 1 page such as VAR Backtesting and VAR Analysis (marginal, component..) I can quant abut 7-8 questions about these two points only.
About 50% of the topics were not tested completely. Here is my performance:

35 questions 100% sure.
25 questions between two choices
20 question random guessing...


I am not sure if this will be enough to clear the exam. lets wait and see.

Exactly 2 years ago, i was in your situation and stressed that I failed. I managed to find all the answers to the 80 questions in this forum and looking at other resources. Anyway, I found out that 41 questions correct and all the rest incorrect (with a confidence level of 100% because I remembered exactly what i answered to every questions) and guess what, I scored 1,1,1,2,1. I know its hard to believe but why would I lie, I am not selling anything and you can still check my posts on this forum in 2013, you will see that I was there. So, relax, enjoy your time and i can guarantee that with your 35, 25, 20 you are almost guarantee to pass. Hard to believe but anyone who wants to challenge me on that, be prepared, because I am speaking out of experience (my experience and friends experience too). And the same goes for CAIA that I just cleared (made a LOT of mistakes and still passed it). Just relax
 

Sidewinder

Member
Subscriber
Exactly 2 years ago, i was in your situation and stressed that I failed. I managed to find all the answers to the 80 questions in this forum and looking at other resources. Anyway, I found out that 41 questions correct and all the rest incorrect (with a confidence level of 100% because I remembered exactly what i answered to every questions) and guess what, I scored 1,1,1,2,1. I know its hard to believe but why would I lie, I am not selling anything and you can still check my posts on this forum in 2013, you will see that I was there. So, relax, enjoy your time and i can guarantee that with your 35, 25, 20 you are almost guarantee to pass. Hard to believe but anyone who wants to challenge me on that, be prepared, because I am speaking out of experience (my experience and friends experience too). And the same goes for CAIA that I just cleared (made a LOT of mistakes and still passed it). Just relax

Some story for me for Part I, but my CL ist not 100 :)
 

Esbringa

New Member
Some questions

-A floating rate note with 4 periods of time, ¿what was the period with highest exposure?
-Credit Link Note, Total Return Swap, ¿What is the safest to the protection buyer?
-ARAROC and systemic risk
-OIS vs LIBOR discounting
-CDO for a car bussines
-VaR if correlation among collateral and the instrument changes.
-One about correlation of operational events and tails
-CVA Budget with a table with all the inputs (PD,LGD,EAD)
-3rd pillar of Basel is about Market disclosure
 

babyik

Member
Exactly 2 years ago, i was in your situation and stressed that I failed. I managed to find all the answers to the 80 questions in this forum and looking at other resources. Anyway, I found out that 41 questions correct and all the rest incorrect (with a confidence level of 100% because I remembered exactly what i answered to every questions) and guess what, I scored 1,1,1,2,1. I know its hard to believe but why would I lie, I am not selling anything and you can still check my posts on this forum in 2013, you will see that I was there. So, relax, enjoy your time and i can guarantee that with your 35, 25, 20 you are almost guarantee to pass. Hard to believe but anyone who wants to challenge me on that, be prepared, because I am speaking out of experience (my experience and friends experience too). And the same goes for CAIA that I just cleared (made a LOT of mistakes and still passed it). Just relax

@chouchoc- sounds too good to be true that 41 /80 led you to 11121. However, we would like to believe that . I had infact bet on 50/80 considering that around 30% of the questions were qualitative with no clear black and white answers and by no yardsticks can the overall paper be labelled as less than tricky . Your post has been a great motivator. Thanks. Lets wait for 2 Jan 2016 and revisit our posts with fond memories.
 

babyik

Member
Some questions

-A floating rate note with 4 periods of time, ¿what was the period with highest exposure?
-Credit Link Note, Total Return Swap, ¿What is the safest to the protection buyer?
-ARAROC and systemic risk
-OIS vs LIBOR discounting
-CDO for a car bussines
-VaR if correlation among collateral and the instrument changes.
-One about correlation of operational events and tails
-CVA Budget with a table with all the inputs (PD,LGD,EAD)
-3rd pillar of Basel is about Market disclosure
_______________________________________________

-A floating rate note with 4 periods of time, ¿what was the period with highest exposure? -[ i guessed T/2 , not sure.]
-Credit Link Note, Total Return Swap, ¿What is the safest to the protection buyer?- [CLN - the question was which party had the least counterparty risk]
-ARAROC and systemic risk [ It will increase firm value ]
-OIS vs LIBOR discounting [ 1100- Guessed ]
-CDO for a car bussines [ 2 options were evidently incorrect..eg balance sheet increases & increased leverage. Dont remember the other two ]
-VaR if correlation among collateral and the instrument changes. [ Dont remember the exact Q]
-One about correlation of operational events and tails [ high frequency, small losses]
-CVA Budget with a table with all the inputs (PD,LGD,EAD) [ Dont remember the answer options but one with the largest EL]
-3rd pillar of Basel is about Market disclosure[/QUOTE]- [I marked the same ie Market Disclosure]
 

HERO

New Member
Exactly 2 years ago, i was in your situation and stressed that I failed. I managed to find all the answers to the 80 questions in this forum and looking at other resources. Anyway, I found out that 41 questions correct and all the rest incorrect (with a confidence level of 100% because I remembered exactly what i answered to every questions) and guess what, I scored 1,1,1,2,1. I know its hard to believe but why would I lie, I am not selling anything and you can still check my posts on this forum in 2013, you will see that I was there. So, relax, enjoy your time and i can guarantee that with your 35, 25, 20 you are almost guarantee to pass. Hard to believe but anyone who wants to challenge me on that, be prepared, because I am speaking out of experience (my experience and friends experience too). And the same goes for CAIA that I just cleared (made a LOT of mistakes and still passed it). Just relax

Thanks for your positive feedback... actually I have comfortable feeling and to prove your point is what is the passing score that about 60% of the candidates will pass such exam? Of course, we cant say it is 70%...so the passing score will be much lower than this. Moreover, from this forum and other forums... the candidates are passing with second quartile (over all)...this translates that passing score - maybe - 45...
 

William_Jose

Member
Subscriber
What should be the answer to that question where it was given that in 250 days a model VaR gave 12 defaults but immediately the day after a default, 6 other defaults happened? What could have been ignored by the model?
 
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Esbringa

New Member
What should be the answer to that question where it was given that in 250 days a model VaR gave 12 defaults but immediately the day after a default, 6 other defaults happened? What could have been ignored by the mode?
I marked serial correlation, kristoffersen test measures the bunching of exceptions when backtesting. I think the ES answer was tricky.
 

HERO

New Member
What should be the answer to that question where it was given that in 250 days a model VaR gave 12 defaults but immediately the day after a default, 6 other defaults happened? What could have been ignored by the mode?
I have selected the answer saying... serial correlation/independence...
 

Twol84

New Member
Subscriber
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 1-netting /positions on Y and Xaxis [ i chose b which was increasing lognormally and then constant]
5.Surplus - Asset-100 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 m-27%/8m-20% 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.Frequency-Severity [ 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 ]

I can't remember what some of my answers were. These are the ones which I can remember and which I had different answers for/or reservations over the answers:

3. OIS- 4/4.5% - LIBOR -5% [ 1100 - guess] -- This is 1009 or something.
16. Call Put Delta [ Call delta decrease , put delta increase ] -- Decrease/decrease. Put delta drops with moneyness.
33. Alpha, Beta , Gamma [ Beta will face funding risk ] -- Not sure about this one, and I think it's partly because GARP isn't always clear with the way answers are worded. You could argue there is some form of funding risk in that Beta cannot provide cash to Alpha, but Beta freezing a repo line in which it provides funding is funding risk to Alpha, not Beta. I think the better answer is the one where Beta's operational risk is reduced. External fraud (even made clear in the question) is an operational risk which would be minimised by a clearinghouse.

-A floating rate note with 4 periods of time, ¿what was the period with highest exposure? -[ i guessed T/2 , not sure.] -- This one threw me for a loop too. Not sure what the correct answer should be, but went with T=2. Could be completely wrong, but the FRN shouldn't pose counterparty risk to the firm that is paying the coupons/face, which leaves just the swap (notice the question asks about c/p risk to the company AND the bank). XCS have credit risk profiles weighted towards the end of the swap, IRS have heavier weightages in the middle. If there had been an option for T=1 / 0.5 years, that would have been interesting as EE has a 0.4 multiplier. Since there isn't, I felt T=2 / 1yr was the best, could be wrong.

I marked serial correlation, kristoffersen test measures the bunching of exceptions when backtesting. I think the ES answer was tricky.

Yeah serial correlation, the model hasn't accounted for the bunching of returns.

Which ES question -- the one where we are given a table of the worst outcomes? Answer is 2.2.
 

William_Jose

Member
Subscriber
The ES question just involved finding the average of the lowest 5 returns. Something like 2.22 was the answer.
I am not sure about the answer of that floating leg value question either. For a float leg, the PV becomes the principal itself as future CFs are the floating rates and they are also discounted by the corresponding zero rates, so should it be just 1000? (unless the zero rates change with time in which case that value will change from the principal)
This was actually something from L1...
 
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afterworkguinness

Active Member
One question that stuck out for me was along the lines of:

An index halted trading for 5 weeks, during that 5 weeks, would the VaR of a portfolio that replicated the index be 0 or unchanged from before the halt in trading. Would the VaR immediately after trading resumed be the same as when trading was halted,higher or lower.
 

Toy

New Member
Subscriber
TwoL84 you wrote

16. Call Put Delta [ Call delta decrease , put delta increase ] -- Decrease/decrease. Put delta drops with moneyness.

Are you saying decrease/decrease is the answer? I think call delta decrease, put delta increase. Both can't move in the same direction. If have sold a call option and the underlying goes down in price, the option is less profitable to the buyer so I need less of the underlying to hedge. If on the other hand I sold a put and the underlying decrease, the likelihood of having to pay out increases so I need more underlying to hedge out all my risk.
 

William_Jose

Member
Subscriber
TwoL84 you wrote

16. Call Put Delta [ Call delta decrease , put delta increase ] -- Decrease/decrease. Put delta drops with moneyness.

Are you saying decrease/decrease is the answer? I think call delta decrease, put delta increase. Both can't move in the same direction. If have sold a call option and the underlying goes down in price, the option is less profitable to the buyer so I need less of the underlying to hedge. If on the other hand I sold a put and the underlying decrease, the likelihood of having to pay out increases so I need more underlying to hedge out all my risk.
It is about the change in price (delta) and not price itself. The put delta does increase in magnitude but is negative, (like changing from -1 to -3) so it reduces, ie., becomes more negative.
 

Sidewinder

Member
Subscriber
It is about the change in price (delta) and not price itself. The put delta does increase in magnitude but is negative, (like changing from -1 to -3) so it reduces, ie., becomes more negative.
I think decrease / decrease is correct...I also marked decrease call, increase put...tricky
 
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