Is chp 1. - Measures of risk question up to date?

[payals66]

Hi,

I am writing in regards to study notes - chp 1. - Measures of risk. The question 27.1 is referring to 27.1 is referring to the concept of absolute VAR. This concept is not covered in the above notes nor can I find absolute VAR concept in GARP book for this capter. Considering the recent changes in FRM 2020, I want to confirm if Bionic Turtle content is up to date and in line with 2020 FRM GARP content. Please clarify, as I feel there is a lot of content in Bionic that is not in the actual GARP book and it is making me very confused which resource is reliable. But more importantly, it worries me when I see a concept not covered in the study notes and questions below referring to something completely different. Please could you clarify. Thanks

 

[David Harper CFA FRM]

Hi @payals66 Yes, our notes are up to date (<-- and yes that's my eyeroll) GARP's new books often contain gaps relative to the LOs. For example, you aren't to Chapter 4 yet, but you'll see https://forum.bionicturtle.com/threads/garp-chapter-4-books-do-not-cover-specific-concepts.23217

Absolute VaR is an important term they've neglected to include (it was in the material before their new first-version internal re-write) but it is highly relevant and only now implicit in their material. It's extremely fundamental to distinguish between absolute and relative VaR, even if we don't realize the semantics (We are giving the proper name to a fundamental choice). So if we don't introduce the difference between absolute/relative VaR, when you see questions later that assume you know the difference, it's actually more confusing to have never mentioned this key distinction. To omit absolute/relative distinction is a straight up omission in risk.

There are a lot of problems and omissions in GARP's new 2020 material, I started a thread https://forum.bionicturtle.com/threads/problems-in-garps-2020-frm-material.23011 but haven't had a chance to add recent findings (as new problems are observed literally each week, it's becoming a very large list), at some point will be collecting the considerable cumulative feedback into an organized post. You'll notice GARP's EOC questions are not exam-level? Well, similarly, some of their material doesn't really go very deep in sections, and often there is no quantitative illustration. Admittedly, our notes do go deeper (i.e., our notes often go deeper in knowledge than will be required), but we want candidates to learn the correct terminology and methodology etc. We definitely update, you can see, according to the latest LOs. You can see that I am suggesting our notes are better updates to the LOs; I can't tell if you are aware, but in Part 1, this year the LOs didn't really change, the change was the shift in their readings. A better question might be: how complete are GARP's chapters (being their first new internal attempt to match the externally assigned authors) with their own LOs? Let me know when you notice how some of the stated LOs aren't actually covered in any substantive depth in their new notes. I do hope that's helpful,

 

[payals66]

Thank you for your reply. This does clarify few things. But this seems quite ridiculous to me that the main source provider (GARP) has so many errors, and omissions. As this does really hamper my studying if the main source is not educating me in the right manner. Yes your notes are definitely very detailed and question banks really test the knowledge. This is my attempt at FRM Part 1, and I am not aware of the exam level questions. however, based on what I have read and clarifications provided by you. I will stick your notes for better prep. Thank you

 

[David Harper CFA FRM]

Thank you @payals66 It is definitely ridiculous. To me, it's unacceptable. But it's a really terrific business for them, most amazing business I've ever seen. That's why I rolled my eyes, because you asked if our notes are up to date, which is ironic considering the state of their readings (and their limited number of sample PQs which have required massive corrections/feedback). Two years ago, I wrote a detailed memo to GARPs Board/Trustees which, if you like, you can read here https://forum.bionicturtle.com/thre...-committee-and-garps-board-of-trustees.22758/ It's not the exact same issue, but it concerns the quality of the FRM exam. Please don't get me wrong: we make plenty of mistakes, and our material has gaps until we plug them. But on the other hand, this forum makes us totally accountable to everybody. I hope that's interesting.

 

[payals66]

Thank you David. This is impressive and thank you for putting yourself forward to support us students. Just one thing to add, as I felt you didnt clarify one point I mentioned above. In chapter 1 - Measures of Financial Risk (Book 3). The question 27.1 seems not to be covered in your notes of Chapter 1. Infact it is covered in study notes of Chapter 2. Is that right or have I missed something? Because this confused me even more. Please do let me know. Thank you

 

[payals66]

I meant Book 4 - Valuation and Risk

 

[David Harper CFA FRM]

@Nicole Seaman I'm trying to prep a focus review video, and again need to limit my daily forum time spend, do you know to which question is referred? 27.1?

 

[David Harper CFA FRM]

@Nicole Seaman nevermind, i found it. But we need a way to deal with these sort of questions which are frankly disruptive to my work

 

[David Harper CFA FRM]

@payals66 here is the question

"27.1. Dowd defines an arithmetic, absolute value at risk (VaR) given by VaR(%) = -drift + volatility*deviate. For a portfolio with current value of $1.0 million, expected return of 15.0% and volatility of 40% per annum, which of the following is nearest to the 99.0% confident 20-day absolute VaR (assume T = 250 days per year)?"

I don't even know what you are asking but I can tell you: this is a highly typical question. It's in the notes, it's in GARP's readings. No, I'm not going to go hunt for it, I'm trying to record a 3-hour focus review today. Yes, the question includes "absolute" because, you know, I care about precision in terminology. I'm hard pressed to think of a question type that is more fundamental and typical (and it's well-supported in both GARPs readings and our notes!)

We won't be doing this dance with you all semester, all due respect. This forum exposes us to high accountability, but i'm not going to reconcile every little detail. You happen to pick on a super obvious case (wth? pardon my slang, are you just kidding me ...). Absolute VaR is like the most testable and documented thing. Have a good day.

 

[payals66]

@David. Apologies for the disruption. However, your study notes not being consistent with the question stated below is disruptive to my studies as well. @Nicole Seaman: Since David is busy. All I am saying is your study notes - Chapter 1 - Measures of Financial Risk has a question (attached) that relates to a concept that is not covered in Chapter 1 - Measures of Financial Risk. But rather it seems that this question is related to a concept covered in Chapter 2 - Calculating and Applying VAR. I just wanted to clarify that. However, seems like I am wasting my time here. Thanks

 

[David Harper CFA FRM]

@payals66 yes, it's covered specifically in Chapter 2. Like i said, we are not going to do this with you every instance. We are very busy updating content and giving support on much more substantive issues (learnings).

 

[payals66]

Thank you for your time. Appreciate it.

 

[David Harper CFA FRM]

@Nicole Seaman maybe we have a FAQ on this already, but we need a link I can send people to when they are asking me/us to cross-reference. We have an open forum, not every visitor understands that support takes time. We need to have a boilerplate response. This is a good use case because question 27.1 is just about the best example of a basic, typical, foundational, highly testable question. It is an absolute waste of my time to be trying to source the cross-reference on such a basic question that is grounded in Part 1. (By waste, I really mean opportunity cost, as I do spend at least 1.5 hours per day, every single day, so I enjoy support, but unnecessary logistical questions are an opportunity cost.)