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Exam FeedbackNovember 2019 Part 2 Exam Feedback

amit.m.sharma

Member
on question 2: UL-EL; 4*bonds notional minus 5%of portfolio.
on q54: it should be 0.32 autocorrelation 1 lag.

Do you remember your answer for question 2? Based on BT discussion the correct way to solve is to take the BINOM.INV function on excel which gives you 7 defaults. So, I believe Credit VAR = (7-4)*6mil = 18 mil. I definitely got this one wrong, I chose 11.xx%

mat.tschopp

New Member
Do you remember your answer for question 2? Based on BT discussion the correct way to solve is to take the BINOM.INV function on excel which gives you 7 defaults. So, I believe Credit VAR = (7-4)*6mil = 18 mil. I definitely got this one wrong, I chose 11.xx%
If I am not mistaken 4 defaults are given which reflects the UL and you’ve got to deduct the EL (portfolio value * pd * lgd) from it. I don’t know the exact result anymore but it was on the list to choose from.

Pciruna

New Member
If I am not mistaken 4 defaults are given which reflects the UL and you’ve got to deduct the EL (portfolio value * pd * lgd) from it. I don’t know the exact result anymore but it was on the list to choose from.
Agreed. I took the same approach- # of defaults were already given at the requested percentile.

prasunkhan

New Member
Do you know which ccp reading mentioned that formula? I was curious about that question as well.

Do you know the logic behind why 3/2 power?

I followed Schweser Notes where it was mentioned that
Liquidation costs can be significant for large positions or concentrated positions. A proper
disposition of an unusually large position would often take additional time beyond the stated risk horizon to achieve, therefore resulting in a liquidation horizon that is greater than the risk horizon. As a result, there is a nonlinear relationship between liquidation
costs and portfolio size. A typical risk measure such as SD, VaR, or ES has a 1:1 linear relationship to portfolio notional size (N). In contrast, the relationship between liquidation cost to position size is N x N^(1/2), or N^(3/2) . For example, if N is doubled, SD, VAR, and ES
would double as well but liquidation costs would increase by 2.83 times (2^(3/2))
.

Coot

New Member
I found that exam tough. So many questions I wasn't 100% certain of.

aksl

New Member
This year this group is not that active. While checking last years review ppl were discussing a lot.
Is it because exam was tough or ppl dont remember questions and answers?

Member
Hi...I'm little bit late to share my experience and views on the exam.

As usual exam is dominated by theory questions this time too. 1/4th of the exam is on quantitative part. My paper starts with a questions on difference b/w Filtered historical simulation and historical simulations. Answers to all first 10 questions and similarly all quantitative questions were spot on except 2 problems (i.e RAROC & CPR).

As someone mentioned in the previous chats, current issues is a free lunch in frm part2. I was able to answer all of them.

Below are the questions I remember:

• Difference b/w Filtered historical simulation and historical simulation. Ans C is the right option i.e conditional probability and variance & covariance matrix
• Calculation of Expected shortfall
• Calculation of Ho-Lee
• Calculation of LVaR
• Calculation of CVaR
• Calculation of Lognormal VaR
• Calculation of CPR
• Calculation of EL using Hazard Rate and PD.
• Calculation of Hedging using Beta
• Calculation of Distance to Default (DD)
• Question on QQ plot when comparing standard distribution assumption
• Question on Corporate Retail Banking
• Question on type of wrong way risk (WWR)
• Question on Risk Neutralization
• Question on alphas
• Question on Mapping i.e from Principal to Duration and from Duration to Cash flow – What is the reason?
• Question on parameters of POT and GEV
• Question on Asset liability Management
• Question on difference b/w Policy Mix & Asset Management VaRs
• Question on Value mapping and – Negative impact & pull down the prices
• RAROC question using alternative asset & it’s impact on RAROC decision making
• Hedge fund – difference b/w Merger & distress strategies
• Straight forward question on Unsmoothing
• Stress test – Losses due to Combination of unemployment & MBS
• 2 questions on SOFR: a) difference b/w SOFR & LIBOR & b) Base for calculating SOFR prices
• 2 questions of CCP mechanism
• 1 question of Deep learning which is a combination of supervised & unsupervised methods
• Difference b/e Market & Operations risk distributions
• Ops Risk – Identify the frequency & severity
• 1 question on ML/FT – straight forward

Coot

New Member
This year this group is not that active. While checking last years review ppl were discussing a lot.
Is it because exam was tough or ppl dont remember questions and answers?
I can't remember a lot of the questions/answers. Even reading over others' posts about the exam questions not everthing rings a bell.

Joyjeet

New Member
What was the answer to incremental VaR
1. For the 75 bonds of 6mil, 4 defaults at 95% CVaR = 4*6mil-6*75*PD*LGD (can't remember the parameters)
2. Incremental VaR questions were IVaR = VaR with both portfolios - VaR of the single position
3. Basel 3 guidelines - this one I think was retail mortgages split by LTV. It wasn't the A-IRB answer as the text says that this has been taken away as an option for banks and corps which was part of the sentence.
4. SOFR question - I think the answers were weighted median for the one, the other one I think was comparing LIBOR as this was it was collateralised?
5. Ho-Lee lower 2nd node: think it was like 1.06%?
6. Credit rating from A to min BBB - I think this was 0.27%?
7. QQ plot: mass in the center and tails are different
8. AML and terrorism financing - don't open accounts for anonymous clients
9. Pt-P(t-1)=0.24-0.68P(t-1) - I picked autocorrelation = 0.32
10. Special % rate - I got 389, I picked special rate but I'm not sure???
11. RMU question - think this was monitoring and analysing and communicating
12. Joint PD = rho*sqrt(PDaPDb(1-PDa)(1-PDb))+PDaPDb
13. Conditional PD question was ((1-exp(-0.09*2)-(1-exp(-0.09))/exp(-0.09)
14. There was a question about VaR = IM and if you increase the notional from 50 to 100, what does it become? I had no idea here.

javal123

Member
Can anyone say what will be the passing marks for frm

ftm

New Member
Based on what I read, it should be between 60-65%, so I guess 48-52 marks

antogiar

Active Member
Can anyone say what will be the passing marks for frm

between 60 and 65% of correct answers

Kakirup

New Member
between 60 and 65% of correct answers
Has the cutoff of the last exam of 16 November already been determined by GARP?

Staff member
Subscriber

antogiar

Active Member
Has the cutoff of the last exam of 16 November already been determined by GARP?

They don't disclose the cut-off they disclose the pass rate.

amit.m.sharma

Member
They don't disclose the cut-off they disclose the pass rate.

We can’t look at a cut-off as THE deciding factor for passing the exam.

As per GARP, ‘The exam result is determined by many factors and is not predetermined nor is it a specific percentage of the points either for individual modules areas or for the entire exam. The exam results are determined by the FRM/ERP Committee(s).‘

chintanmatalia

Member
Any status on results? This time I am expecting passing rate on higher side in range of 57 to 62 percentage for Level 2 as the syllabus has been revamped. Let's see!!

Detective

Active Member
Any status on results? This time I am expecting passing rate on higher side in range of 57 to 62 percentage for Level 2 as the syllabus has been revamped. Let's see!!

I believe official release is January 2nd.

Getting 45-50 out of 80 for minimum pass sounds reasonable.

hikmaet

New Member
Expected date of results? anyone?

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