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Exam Feedback November 2019 Part 2 Exam Feedback

#65
It was the reading, paper Central clearing and risk transformation from norges bank.
Did the question say that the size of the trade was large compared to the daily volume traded? N^3/2 is applicable if we offload the position in parts. I remember the notionals being 50m and 100m but don't recall what product it was and if there was an increase in the horizon.
Sorry, my short term memory is not that great especially during times of stress.
 

Detective

Active Member
Subscriber
#69
Did the question say that the size of the trade was large compared to the daily volume traded? N^3/2 is applicable if we offload the position in parts. I remember the notionals being 50m and 100m but don't recall what product it was and if there was an increase in the horizon.
Sorry, my short term memory is not that great especially during times of stress.
I think they are right to use the formula, but the phrasing of the question seemed a little strange.

The source:
https://static.norges-bank.no/contentassets/432aa1c401a243f9b08a3f3aecd4c71d/working_paper_3_17.pdf
(P.12 in article)

So I think (100/50)^(3/2) ~ 2.8 is valid; these were choices I had:

A) 1
B) 1.4
C) 2.8
D) 3.5

The question said position size increased from 50MM and 100MM and that VaR increased 1:1 manner and asked what was factor increase of IM? [not sure on last part]

If it was factor increase wrt to VaR increase (which I don’t believe the question asked) then 2.8/2 = 1.4 could be the answer.

However, based on above I am mostly convinced 2.8 was the intended answer.
 
#70
I think they are right to use the formula, but the phrasing of the question seemed a little strange.

The source:
https://static.norges-bank.no/contentassets/432aa1c401a243f9b08a3f3aecd4c71d/working_paper_3_17.pdf
(P.12 in article)

So I think (100/50)^(3/2) ~ 2.8 is valid; these were choices I had:

A) 1
B) 1.4
C) 2.8
D) 3.5

The question said position size increased from 50MM and 100MM and that VaR increased 1:1 manner and asked what was factor increase of IM? [not sure on last part]

If it was factor increase wrt to VaR increase (which I don’t believe the question asked) then 2.8/2 = 1.4 could be the answer.

However, based on above I am mostly convinced 2.8 was the intended answer.
Thanks Detective.
 

Pciruna

New Member
Subscriber
#74
ON the QQ plot question, I felt it was down to two valid choices. Apart from the one already mentioned above, why wouldn’t “ a QQ plot having a slope less than 1” imply heavier tails than a normal distribution- which is what the question was asking I believe?
 

deepee1992

New Member
Subscriber
#80
I think the slope would change throughout the QQ plot since both tails of the T-dist are fatter than the Normal? There's some helpful diagrams here: https://stats.stackexchange.com/questions/101274/how-to-interpret-a-qq-plot

Also had no idea on the scaling liquidity cost with VaR/notional.

The GEV question was worded very oddly--they appeared to include the u parameter (from GEV, which must be estimated) and the threshold level (from PoT, which is chosen) which I thought were mutually exclusive?
 
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