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! 
Exam Feedback FRM Part 2 (November 2014) Exam Feedback
Plz share your experience and feelings re today's exam. I found that there were many questions which could be easily cracked out of common sense ( read all answers and rule just out the obvious no-nos). Quantative questions were also rather simple formulas (CVaR, ARAROC, etc).
My guess passing score will be high to insure that only half to pass.
My guess passing score will be high to insure that only half to pass.
One question really puzzled me, bank xyz hedging long position in us gov bonds with SCDS. Prev model used average of bid prices, now considering moving to mid price. As the bank was the protection buyer it was paying, not receiving premiums, so one answer is ruled out. As remember, I selected out of blue, answer 'bank's CP might be violating Basel rules'.
Graph on PFE was rather simple, thanks to BT's video, I remember the shape, and feature of having peak PFE at around 1\3 of maturity for IRS (swap was there) zig zag ness of the shape I remember due to inequality in payments.
Anyone remembering other questions, I m kind of lost some memory after the exam, cannot recall any further question.
Waiting period starts....
Graph on PFE was rather simple, thanks to BT's video, I remember the shape, and feature of having peak PFE at around 1\3 of maturity for IRS (swap was there) zig zag ness of the shape I remember due to inequality in payments.
Anyone remembering other questions, I m kind of lost some memory after the exam, cannot recall any further question.
Waiting period starts....
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I thought of the SCDS question like this- If the contract is marked to the mid price rather than the ask price, it will be equivalent to spread widening, which benefits the protection buyer, So the counterparty will have to post more collateral which was one of the options. Was not fully confident though.
Pennywenny
New Member
How about question on cmo with big senior and mezzanine small tranches and zero equity tranche?
First question was impact on senior tranche when correlation increases, PD being unchanged.
Second was interest due to equity tranche. Since the was no equity tranche investors, zero pay - this is what I selected.
First question was impact on senior tranche when correlation increases, PD being unchanged.
Second was interest due to equity tranche. Since the was no equity tranche investors, zero pay - this is what I selected.
JacquesBBB
New Member
I selected Zero qs
I selected Zero as well
JacquesBBB
New Member
What about the leverage Ratio. I did nt understand the RWA in the denomitor. For me the Definition of this Ratio is Tier one / exposure
JacquesBBB
New Member
I selected Tier one, but the consistency with the RWA in the denominator implied
perhaps common equity in the numerator
I don't remember much as well... quite a few verbose questions. calculator usage was minimal based on the questions.
Question on Variance swap,
very few questions on Current issues < 8,
Sharpe, treynor, but i got lost with the choices given
Also noticed there are multiple questions (based on the same explanation) like below 3 questions are based on the above explanation. I noticed about 5 sets a total of 10-15 questions.
Question on Variance swap,
very few questions on Current issues < 8,
Sharpe, treynor, but i got lost with the choices given
Also noticed there are multiple questions (based on the same explanation) like below 3 questions are based on the above explanation. I noticed about 5 sets a total of 10-15 questions.
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I found it very difficult. Almost 60% questions were unexpected.
Around 7-8 questions were in SCDS which I found difficult. One was on LCR, on leverage ratio and ARACOC. Even MBS and volatility smile questions were very tricky.
GARP practise questions didn't do any justice. I had prepared well still I have doubt on 50% questions.
Around 7-8 questions were in SCDS which I found difficult. One was on LCR, on leverage ratio and ARACOC. Even MBS and volatility smile questions were very tricky.
GARP practise questions didn't do any justice. I had prepared well still I have doubt on 50% questions.
It was very difficult for me. I solved all BT problems published here but was quiet surprised to see 95% of qualitative questions on the exam. I wish I had spent more time rereading books instead. There was an error on my paper (I think) with finding number of exceptions and given n=2500 instead of 250 and the answer was 35. Also after reviewing what people said about May's exam on this forum, I thought the questions were easy, but November's exam was hard. I felt better after the first part than today.
HT_William
New Member
I also think that question has something wrong, the answer seems to be 35, but given the information it cannot be arrived.
Same here. Preparing for one more month would not have made any difference.CFA L2 syllabus is voluminous but here the questions were vaguely worded. I thought BT question drills we're very good. There were sufficient qualitative questions but in the exam the focus was on 'best', 'most likely' etc where more than one answer seemed plausible. FRM seems to provide positive surprises to candidates. Hope I will be pleasantly surprised on the result day.
monumonumental
Member
I selected the followings
i will disclose as much as i can remember)
1) variance swaps are easy to price.
2)We use internal data for body and distributions to model tail in measuring of loss severity.
3)Cvar came to be 8000
4)Leverage ratio was around 2.94%
5)73% was LCR
6)The Var for HW was higher than HS by 3.8..something for 1 day horizon.
7)RAF should be forward looking and include risk appetite.
8)PO strips have more duration than passthrough from which they are created.
9)I think there was a question on cash account/principal account with mbs/corporate bond..i think i selected that negative convexity of MBS is offset by positive convexity of corporate bond.
10)There was a question on CLN.I think answer was that CLN has a CDS with protection seller paying upfront or something like that.
11)A question on asset allocation where portfolio outperformed the benchmark due to asset allocation.
12)A question on trade repository where i selected that they are to protect unsophisticated investors from cheating.
13)A question on transaction liquidity where i selected the 1st option.
14)A question on WWR where i selected that OTM puts have higher WWR if purchased from oil producer.
15)Differnce between current and past market risk charges including SVAR/VAR i think the answer was 320.
16)Araroc where project should be rejected.
17)A question on minimum intrest for Raraoc where i selected 5%
18)Graph of IO strip..i think it should be D as interst component decreases over time.
19)A question where we had to use montecarlo to value MBS.
20)Diff between OAS/NS/ZS.
21)a question on EL where i think the answer was 60.
22)A question on tranches where the money paid to equity tranch was 0.
23)Hedge fund has high sharpe ratio than DJSI index.
24)Q stat was significant for a fund hence there was liquidity risk and perhaps data smoothing was done.
25)A question on versik model where i selected that they use long term value of short term interest rates.
26)A question on convertible bond arbitrage..where it selected liquidity permium as a source of return.
27)Ban on naked SCDS will induce iliquidity and less price information.
28)PFE for Int swap with unequal payments.
29)A question on CRA where i think the answer was economic return on collateral.
30)Few questions on CSA where stronger party will want one CSA ......
31)A question where answer would be weighted avg of betas.
32)A question on model calibration risk where wrong model was used to value derivatives..ie delta normal was used.
33)A question on volatality smrik kind of diagram where delta was greater than .5.
34)A question on long/short equity..
35)Housing market is procyclical so extra protection are required by banks during economic downturns.
36)SAR decreases with decreasing interest rates.
37)Declining transaction cost impacts dispersion.
38)A question on performance attribution.
39)A question on LDA where it was told that lognormal should be used for severity always as per basels and i thought it was false..as basel never says to use lognormal for severity...
40)A question on holee model..i am not sure about the answer.
41)risky debt=rf-put
42)finding var usiing BRW or hybrid..i can't remember but the answer was 6.8 something.
43)AMA wants scenario analysis to be included to model capital ..
44)A easy question on finding the RWA.
45)Solvency vs Basel..i think i got it correct.
46)question on ir/trenor/sharpe..
47)A question on netting where the answer should be payment netting between for wards.
48)A question where the answer would be buying of SCDS to protect against soverign risk.
49)A question where answer will be that changes in reference rate may impact monetary policy beyond boundaries or something like that...
50)As default corre;ation increases VAR from senior tranches will increase dramatically as tail risk will increase..
51)Question on backtesting where answer seems to be 35.
thats all i can remember for now...over all i think the paper was tough....i was unable to understand most questions and had to make educated guesses most of the time.
i will disclose as much as i can remember)1) variance swaps are easy to price.
2)We use internal data for body and distributions to model tail in measuring of loss severity.
3)Cvar came to be 8000
4)Leverage ratio was around 2.94%
5)73% was LCR
6)The Var for HW was higher than HS by 3.8..something for 1 day horizon.
7)RAF should be forward looking and include risk appetite.
8)PO strips have more duration than passthrough from which they are created.
9)I think there was a question on cash account/principal account with mbs/corporate bond..i think i selected that negative convexity of MBS is offset by positive convexity of corporate bond.
10)There was a question on CLN.I think answer was that CLN has a CDS with protection seller paying upfront or something like that.
11)A question on asset allocation where portfolio outperformed the benchmark due to asset allocation.
12)A question on trade repository where i selected that they are to protect unsophisticated investors from cheating.
13)A question on transaction liquidity where i selected the 1st option.
14)A question on WWR where i selected that OTM puts have higher WWR if purchased from oil producer.
15)Differnce between current and past market risk charges including SVAR/VAR i think the answer was 320.
16)Araroc where project should be rejected.
17)A question on minimum intrest for Raraoc where i selected 5%
18)Graph of IO strip..i think it should be D as interst component decreases over time.
19)A question where we had to use montecarlo to value MBS.
20)Diff between OAS/NS/ZS.
21)a question on EL where i think the answer was 60.
22)A question on tranches where the money paid to equity tranch was 0.
23)Hedge fund has high sharpe ratio than DJSI index.
24)Q stat was significant for a fund hence there was liquidity risk and perhaps data smoothing was done.
25)A question on versik model where i selected that they use long term value of short term interest rates.
26)A question on convertible bond arbitrage..where it selected liquidity permium as a source of return.
27)Ban on naked SCDS will induce iliquidity and less price information.
28)PFE for Int swap with unequal payments.
29)A question on CRA where i think the answer was economic return on collateral.
30)Few questions on CSA where stronger party will want one CSA ......
31)A question where answer would be weighted avg of betas.
32)A question on model calibration risk where wrong model was used to value derivatives..ie delta normal was used.
33)A question on volatality smrik kind of diagram where delta was greater than .5.
34)A question on long/short equity..
35)Housing market is procyclical so extra protection are required by banks during economic downturns.
36)SAR decreases with decreasing interest rates.
37)Declining transaction cost impacts dispersion.
38)A question on performance attribution.
39)A question on LDA where it was told that lognormal should be used for severity always as per basels and i thought it was false..as basel never says to use lognormal for severity...
40)A question on holee model..i am not sure about the answer.
41)risky debt=rf-put
42)finding var usiing BRW or hybrid..i can't remember but the answer was 6.8 something.
43)AMA wants scenario analysis to be included to model capital ..
44)A easy question on finding the RWA.
45)Solvency vs Basel..i think i got it correct.
46)question on ir/trenor/sharpe..
47)A question on netting where the answer should be payment netting between for wards.
48)A question where the answer would be buying of SCDS to protect against soverign risk.
49)A question where answer will be that changes in reference rate may impact monetary policy beyond boundaries or something like that...
50)As default corre;ation increases VAR from senior tranches will increase dramatically as tail risk will increase..
51)Question on backtesting where answer seems to be 35.
thats all i can remember for now...over all i think the paper was tough....i was unable to understand most questions and had to make educated guesses most of the time.
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revexrevex
New Member
It was an incredibly difficult exam. Here is why: I would divide questions into 4 parts,
(1) I have no idea what they are asking because information presented is not concise nor complete. Examples: (a) Giving default probabilities in percentages, and then decimal points (i.e. 0.2 can be interpreted as 0.2% or 2%). (b) Giving VARs but not telling you whether it is a 10 day, or 1 day. (c) Given 50 days of returns, estimate 95% var --> then adding 10 more days and asking what the updated VAR is without specifying whether new period remains 50 or becomes 60. (d) Obscure references to "Level 1" capital, or "1-Step" in Basel. (e) And in general given wall of text full of numbers, ask a totally unrelated question that can be answered without any of the information given.
(2) Answers are so close together that any of them can be true. Example: MF Global question where Corzine banked on European agency to back up soveregn debt. There were *2* almost exact answers! Another one - wrong way risk with choices of Out of Money Puts, or In Money Puts
(3) Focus on obscure topics. 5 freaking questions on Credit Annex Agreement. Only 1 Question on current issues. What seemed to be like 80% focus on market risk, tons on CDS, CDO, ABS and Swaps. Not a single question on exotic options.
(4) Complex, overly difficult compound questions. Some of them had 2 or 3 concepts embedded in them. I have not practiced any that required so much integration of different concepts. Example: Insurance company investing money in cash account, mbs and then trying to hedge interest risk. One of the answers was something about unexpected redemption and needed liquidity?
Anyway I must have guessed on at least 50% of questions (my background: top 10 MBA, passed Cfa level 1, work in Risk management for 10+years). On the up-side i am glad I did not study more, it wouldn't have helped.
(1) I have no idea what they are asking because information presented is not concise nor complete. Examples: (a) Giving default probabilities in percentages, and then decimal points (i.e. 0.2 can be interpreted as 0.2% or 2%). (b) Giving VARs but not telling you whether it is a 10 day, or 1 day. (c) Given 50 days of returns, estimate 95% var --> then adding 10 more days and asking what the updated VAR is without specifying whether new period remains 50 or becomes 60. (d) Obscure references to "Level 1" capital, or "1-Step" in Basel. (e) And in general given wall of text full of numbers, ask a totally unrelated question that can be answered without any of the information given.
(2) Answers are so close together that any of them can be true. Example: MF Global question where Corzine banked on European agency to back up soveregn debt. There were *2* almost exact answers! Another one - wrong way risk with choices of Out of Money Puts, or In Money Puts
(3) Focus on obscure topics. 5 freaking questions on Credit Annex Agreement. Only 1 Question on current issues. What seemed to be like 80% focus on market risk, tons on CDS, CDO, ABS and Swaps. Not a single question on exotic options.
(4) Complex, overly difficult compound questions. Some of them had 2 or 3 concepts embedded in them. I have not practiced any that required so much integration of different concepts. Example: Insurance company investing money in cash account, mbs and then trying to hedge interest risk. One of the answers was something about unexpected redemption and needed liquidity?
Anyway I must have guessed on at least 50% of questions (my background: top 10 MBA, passed Cfa level 1, work in Risk management for 10+years). On the up-side i am glad I did not study more, it wouldn't have helped.
monumonumental
Member
I selected the followingsi will disclose as much as i can remember)
1) variance swaps are easy to price.
2)We use internal data for body and distributions to model tail in measuring of loss severity.
3)Cvar came to be 8000
4)Leverage ratio was around 2.94%
5)73% was LCR
6)The Var for HW was higher than HS by 3.8..something for 1 day horizon.
7)RAF should be forward looking and include risk appetite.
8)PO strips have more duration than passthrough from which they are created.
9)I think there was a question on cash account/principal account with mbs/corporate bond..i think i selected that negative convexity of MBS is offset by positive convexity of corporate bond.
10)There was a question on CLN.I think answer was that CLN has a CDS with protection seller paying upfront or something like that.
11)A question on asset allocation where portfolio outperformed the benchmark due to asset allocation.
12)A question on trade repository where i selected that they are to protect unsophisticated investors from cheating.
13)A question on transaction liquidity where i selected the 1st option.
14)A question on WWR where i selected that OTM puts have higher WWR if purchased from oil producer.
15)Differnce between current and past market risk charges including SVAR/VAR i think the answer was 320.
16)Araroc where project should be rejected.
17)A question on minimum intrest for Raraoc where i selected 5%
18)Graph of IO strip..i think it should be D as interst component decreases over time.
19)A question where we had to use montecarlo to value MBS.
20)Diff between OAS/NS/ZS.
21)a question on EL where i think the answer was 60.
22)A question on tranches where the money paid to equity tranch was 0.
23)Hedge fund has high sharpe ratio than DJSI index.
24)Q stat was significant for a fund hence there was liquidity risk and perhaps data smoothing was done.
25)A question on versik model where i selected that they use long term value of short term interest rates.
26)A question on convertible bond arbitrage..where it selected liquidity permium as a source of return.
27)Ban on naked SCDS will induce iliquidity and less price information.
28)PFE for Int swap with unequal payments.
29)A question on CRA where i think the answer was economic return on collateral.
30)Few questions on CSA where stronger party will want one CSA ......
31)A question where answer would be weighted avg of betas.
32)A question on model calibration risk where wrong model was used to value derivatives..ie delta normal was used.
33)A question on volatality smrik kind of diagram where delta was greater than .5.
34)A question on long/short equity..
35)Housing market is procyclical so extra protection are required by banks during economic downturns.
36)SAR decreases with decreasing interest rates.
37)Declining transaction cost impacts dispersion.
38)A question on performance attribution.
39)A question on LDA where it was told that lognormal should be used for severity always as per basels and i thought it was false..as basel never says to use lognormal for severity...
40)A question on holee model..i am not sure about the answer.
41)risky debt=rf-put
42)finding var usiing BRW or hybrid..i can't remember but the answer was 6.8 something.
43)AMA wants scenario analysis to be included to model capital ..
44)A easy question on finding the RWA.
45)Solvency vs Basel..i think i got it correct.
46)question on ir/trenor/sharpe..
47)A question on netting where the answer should be payment netting between for wards.
48)A question where the answer would be buying of SCDS to protect against soverign risk.
49)A question where answer will be that changes in reference rate may impact monetary policy beyond boundaries or something like that...
50)As default corre;ation increases VAR from senior tranches will increase dramatically as tail risk will increase..
51)Question on backtesting where answer seems to be 35.
52)Lock in period of 18 for hedge fund will cause harm.
53)Where you don't need to rely on qualitative aspects only??1)Consumer 2)Financial 3)Non financial 4)Soverign...i think it is Consumer..
54)Why do we need trade repositories..i think i selected to prevent unsophisticated investors..but now i think the answer should be to reduce concentrations..
55)
.I think it was which has biggest intrest rate risk or something and i selected MBS and certificates of deposit..
56)Ya got it MBS2 YC 2...I they had biggest difference between nominal and zspread.
YC2 had steeper slope so more differnce between Z spread and Nominal spread.
57)quantile standard errors - I selected asymmetric confidence intervals
58)facts pertaining to bootstrap, age weighted & volatility weighted HS
59)The analyst may face problem to model balancesheet composition..
60)Excess return/mvar1=excess return2/mvar2...is optimim,,
61)Undiversified Var is the upper bound..
62)One more.. they gave the distribution of market, credit, op, firmwide. Investigators found something strange about a distribution.. Not sure of the answer i picked firmwide which is described as very close to normal.. want to hear your thoughts
I knew the holee model question and few other but did silly mistakes on them due to time constraint and confusing wordings presented by GARP/
thats all i can remember for now...over all i think the paper was tough....i was unable to understand most questions and had to make educated guesses most of the time.
i will disclose as much as i can remember)1) variance swaps are easy to price.
2)We use internal data for body and distributions to model tail in measuring of loss severity.
3)Cvar came to be 8000
4)Leverage ratio was around 2.94%
5)73% was LCR
6)The Var for HW was higher than HS by 3.8..something for 1 day horizon.
7)RAF should be forward looking and include risk appetite.
8)PO strips have more duration than passthrough from which they are created.
9)I think there was a question on cash account/principal account with mbs/corporate bond..i think i selected that negative convexity of MBS is offset by positive convexity of corporate bond.
10)There was a question on CLN.I think answer was that CLN has a CDS with protection seller paying upfront or something like that.
11)A question on asset allocation where portfolio outperformed the benchmark due to asset allocation.
12)A question on trade repository where i selected that they are to protect unsophisticated investors from cheating.
13)A question on transaction liquidity where i selected the 1st option.
14)A question on WWR where i selected that OTM puts have higher WWR if purchased from oil producer.
15)Differnce between current and past market risk charges including SVAR/VAR i think the answer was 320.
16)Araroc where project should be rejected.
17)A question on minimum intrest for Raraoc where i selected 5%
18)Graph of IO strip..i think it should be D as interst component decreases over time.
19)A question where we had to use montecarlo to value MBS.
20)Diff between OAS/NS/ZS.
21)a question on EL where i think the answer was 60.
22)A question on tranches where the money paid to equity tranch was 0.
23)Hedge fund has high sharpe ratio than DJSI index.
24)Q stat was significant for a fund hence there was liquidity risk and perhaps data smoothing was done.
25)A question on versik model where i selected that they use long term value of short term interest rates.
26)A question on convertible bond arbitrage..where it selected liquidity permium as a source of return.
27)Ban on naked SCDS will induce iliquidity and less price information.
28)PFE for Int swap with unequal payments.
29)A question on CRA where i think the answer was economic return on collateral.
30)Few questions on CSA where stronger party will want one CSA ......
31)A question where answer would be weighted avg of betas.
32)A question on model calibration risk where wrong model was used to value derivatives..ie delta normal was used.
33)A question on volatality smrik kind of diagram where delta was greater than .5.
34)A question on long/short equity..
35)Housing market is procyclical so extra protection are required by banks during economic downturns.
36)SAR decreases with decreasing interest rates.
37)Declining transaction cost impacts dispersion.
38)A question on performance attribution.
39)A question on LDA where it was told that lognormal should be used for severity always as per basels and i thought it was false..as basel never says to use lognormal for severity...
40)A question on holee model..i am not sure about the answer.
41)risky debt=rf-put
42)finding var usiing BRW or hybrid..i can't remember but the answer was 6.8 something.
43)AMA wants scenario analysis to be included to model capital ..
44)A easy question on finding the RWA.
45)Solvency vs Basel..i think i got it correct.
46)question on ir/trenor/sharpe..
47)A question on netting where the answer should be payment netting between for wards.
48)A question where the answer would be buying of SCDS to protect against soverign risk.
49)A question where answer will be that changes in reference rate may impact monetary policy beyond boundaries or something like that...
50)As default corre;ation increases VAR from senior tranches will increase dramatically as tail risk will increase..
51)Question on backtesting where answer seems to be 35.
52)Lock in period of 18 for hedge fund will cause harm.
53)Where you don't need to rely on qualitative aspects only??1)Consumer 2)Financial 3)Non financial 4)Soverign...i think it is Consumer..
54)Why do we need trade repositories..i think i selected to prevent unsophisticated investors..but now i think the answer should be to reduce concentrations..
55)
.I think it was which has biggest intrest rate risk or something and i selected MBS and certificates of deposit..
56)Ya got it MBS2 YC 2...I they had biggest difference between nominal and zspread.
YC2 had steeper slope so more differnce between Z spread and Nominal spread.
57)quantile standard errors - I selected asymmetric confidence intervals
58)facts pertaining to bootstrap, age weighted & volatility weighted HS
59)The analyst may face problem to model balancesheet composition..
60)Excess return/mvar1=excess return2/mvar2...is optimim,,
61)Undiversified Var is the upper bound..
62)One more.. they gave the distribution of market, credit, op, firmwide. Investigators found something strange about a distribution.. Not sure of the answer i picked firmwide which is described as very close to normal.. want to hear your thoughts
I knew the holee model question and few other but did silly mistakes on them due to time constraint and confusing wordings presented by GARP/
thats all i can remember for now...over all i think the paper was tough....i was unable to understand most questions and had to make educated guesses most of the time.
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Roshan Ramdas
Active Member
The paper was extremely difficult. What GARP seems to have done is to place the entire weight of the 80 mark exam on every topic that has gone untested in the last few years and on newly introduced chapters as well.
Without exaggeration,.....the topics covered in GARP's sample exams over the last 5 years and end of the book questions barely received around 10 - 15 % of the exam weight (if not lesser).
Without exaggeration,.....the topics covered in GARP's sample exams over the last 5 years and end of the book questions barely received around 10 - 15 % of the exam weight (if not lesser).
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