The question did not say average, otherwise it would have been very easy. The reason I did not take the average is because it does not make sense to me. Now, the sum does not either. However, if one were only liquidating one at a time, the answer could be the sum. I think the numbers were as troubleshooter said, however, I think the 5.xx was closer to 6 than 5, so I just couldn't think of any way to get 5, other than to take the average, which just didn't make sense. So, at least the sum came to approximately 10, so I figured it was one of the choices. Anyway, I guess we'll never know. I did not look back at the original readings. Perhaps if I read it two dozen times, I will be able to find the answer. I'm not sure how the question writers can write such questions where there is no real way to find the answer. In this case, we all know how to calculate the liquidity duration of an individual position. For a portfolio, I don't know, to me, if you could (and I don't see why you couldn't) liquidate both on the same days, the answer, logically, would be the max of the two (which was not one of the choices). Frustrating.
Level 2: Post what your remember here...
- Thread starter troubleshooter
- Start date
I still have not found a convincing answer on the Q-Q plot of a normal vs. an empirical distribution, or something like that. For some reason, I was thinking of empirical as being a lognormal distribution, but thinking about it now, couldn't it be any distribution. I couldn't logically figure out how points could all be above or below. That's the only reason why I chose one that started out below and ended up above, though I don't think that is how a lognormal distribution would look.
I did not think data problems led to different VaR measures. As historical just looks at history and the others have built in assumptions, I thought it was obvious that it was differences in assumptions that led to different VaRs. I'm not sure why others thought it was data problems.
troubleshooter
Active Member
@jdg123:
1) Liquidity duration: I guess you never know about this one... Taking average makes sense if we are asked average liquidity duration but I doubt if "average" was used in the question, otherwise it will be quite straight forward and we would not be talking about it now. Sum may also makes sense if the question writer has assumed that you could not liquidate the 2 positions at the same time but ignored to disclose that assumption to the test takers...
2) Q-Q Plot I thought was fairly strait forward. I chose the third picture where the empirical was straight to left of the y axis and then over the normal line to the right showing extreme values at the upside only.
3) Madoff was very straight forward. Except for consistency in returns, nothing else made much sense.
4) Calculating VARs for options, the delta for deep out of the money call = 0 and delta for deep in the money call = 1 and delta for futures = 1, so you don't include deep out the money call. This was in one of the GARP practice exam too...
5) Different VAR measures was quite badly written question too... The difference was not that significant and I would expect the difference as valid random outcomes. I think it was something like 245,000, 250,000 and 275,000 But we had to pick one of the choices so I chose different assumption, while Data error can always produce such errors. So this one is up in the air too.
1) Liquidity duration: I guess you never know about this one... Taking average makes sense if we are asked average liquidity duration but I doubt if "average" was used in the question, otherwise it will be quite straight forward and we would not be talking about it now. Sum may also makes sense if the question writer has assumed that you could not liquidate the 2 positions at the same time but ignored to disclose that assumption to the test takers...
2) Q-Q Plot I thought was fairly strait forward. I chose the third picture where the empirical was straight to left of the y axis and then over the normal line to the right showing extreme values at the upside only.
3) Madoff was very straight forward. Except for consistency in returns, nothing else made much sense.
4) Calculating VARs for options, the delta for deep out of the money call = 0 and delta for deep in the money call = 1 and delta for futures = 1, so you don't include deep out the money call. This was in one of the GARP practice exam too...
5) Different VAR measures was quite badly written question too... The difference was not that significant and I would expect the difference as valid random outcomes. I think it was something like 245,000, 250,000 and 275,000 But we had to pick one of the choices so I chose different assumption, while Data error can always produce such errors. So this one is up in the air too.
Anyone who thinks this question was had NO good answers, please email GARP, as I did.
I happened to put stock price going down as the correct answer because I didnt think that ANY of the answers were correct, because NONE of them led to an INCREASE in cash flows. The bond coupon was a POSITIVE cash flow but not an INCREASE in cash flows. The stock price going down leads to an increase in PROFIT.
NEITHER CHOICE CORRECTLY ANSWERS THIS QUESTION!!!
Instead of reading trying to read GARPs mind, let them know that they asked a bad question and that they either need to not count this question or count both answers as correct.
frm@garp.com
Shannon
troubleshooter
Active Member
Hi Shannon:
Done that already. Back in 2009 when I did Lvl 1, I did the same and I got a response saying if they agree that the question is flawed, they will be excluded... Here's copy of my communication...
First Email
________________________________________
Sent: Monday, November 23, 2009 8:58 AM
To: FRM
Subject: Level I Exam Question Issues
I am a level I candidate and took the exam in Toronto, Canada on Saturday. I would like to report a couple of issues I noticed with the exam questions.
1. There was a question on box spread. Box spread, though in John Hull textbook, is clearly not in curriculum as per FRM AIMs.
2. There was a question on probability tree that was incomplete. At the last part of the question, it did not specify which way the tree went.
I am sure GARP has processes in place to avoid such operational risk exposures. I would like to know how GARP will go about marking these questions - whether they will be excluded from the markings or they would be treated as any other questions. Also, can we expect questions not in AIMs to appear in Level II in May?
Thanks,
Garp Response 1:
________________________________________
From: Chris Donohue [mailto:Chris.Donohue@Garp.com]
Sent: Friday, December 04, 2009 9:47 AM
Subject: FW: Level I Exam Question Issues
Thank you for your message and your interest in the FRM program. Here are my responses to your questions:
1. The AIMS do have: "Describe and explain the use and payoff functions of spread strategies" and then gives some examples. Because box spreads were not listed in the examples does not imply that they are not part of the curriculum. They are covered in the reading.
2. After the exam, we always get feedback from candidates about potentially problematic questions. We check each of these questions closely and if we agree that there is a problem with the questions, we drop it from the exam scoring. I will make sure we check the question you referenced. Thanks for pointing this out.
As we write the exam, we reference each question to an AIMS statement and will do so for the 2010 exams as well.
Thanks again for your interest. If you have any additional questions, please don't hesitate to contact me directly.
Best regards,
Chris
Christopher J. Donohue, Ph.D.
Managing Director, GARP Research Center
Global Association of Risk Professionals (GARP)
111 Town Square Place, Suite 1215
Jersey City, NJ 07310 USA
t: +1-201-719-7261
m: +1-908-656-0961
e: chris.donohue@garp.com
www.garp.org
Second Email:
___________________________________________________
Sent: Friday, December 04, 2009 9:52 AM
To: Chris Donohue
Subject: RE: Level I Exam Question Issues
Chris:
Thanks for the response. For my Level II preparations, I guess this would mean that I should take the assigned readings in whole as the testable material and regard AIMs as only a guidance and not as an exhaustive and explicit listing of testable material. Would this be correct?
Thanks,
Garp Response 2:
_____________________________________________________
From: Chris Donohue [mailto:Chris.Donohue@Garp.com]
Sent: Friday, December 04, 2009 10:29 AM
Subject: RE: Level I Exam Question Issues
Yes, I would view all the reading material as testable unless we have explicitly said that a section will not be tested, and use the AIMS to guide your studying. I can say confidently that if you are comfortable with the AIMS, you will not have trouble passing this exam even if there are a few questions that are loosely connected to the AIMS. We have pushed the exam development in this direction over the last few years and will continue to do so.
Interesting. I will make sure I email them about other problematic questions as well.
Thank you!
Shannon
So I am getting an exact 60 out of 80 (after considering that I have got wrong - (1) anything which I am unsure about I mark wrong; (2) the answers I know I have surely got incorrect now after reading the reasonings over here)
I hope it is enough for me to pass the exam - I just can't think of re-taking the exam.
Does anyone know what might be the average score with this kind of an exam? I understand it depends on how well the top 5% ppl do and then a specific percentage of that top 5% score - that specific percentage is the most crucial
I hope it is enough for me to pass the exam - I just can't think of re-taking the exam.
Does anyone know what might be the average score with this kind of an exam? I understand it depends on how well the top 5% ppl do and then a specific percentage of that top 5% score - that specific percentage is the most crucial
Hi Majesta, Why are you trying to register so early - ofcourse it will allow you to register - I think the trick only works 1 day before or maybe the result day - they wouldn't have updated the systems yet. Or maybe they will have even fixed the bug this year - so no guarantee it will work
Quick update. I bet they say this every year, but I contacted GARP and got a few responses about the quality and consistency (or lack thereof) of the level 2 exam and they have been pretty good about getting back to me.
I just wanted my voice heard and to let them know that some of the questions had serious flaws. They said that they are aware of it and will try to make it so that nobody is adversely affected by bad questions.
I guess what I am trying to say is that with only a week or so before the results are released, if you have any comments or remember any bad questions it might be worth shooting an email to the powers that be over at GARP.
I wish everyone the best of luck!
Shannon
I just wanted my voice heard and to let them know that some of the questions had serious flaws. They said that they are aware of it and will try to make it so that nobody is adversely affected by bad questions.
I guess what I am trying to say is that with only a week or so before the results are released, if you have any comments or remember any bad questions it might be worth shooting an email to the powers that be over at GARP.
I wish everyone the best of luck!
Shannon
troubleshooter
Active Member
Yes. About a week to go before the results are published. It's already making me nervous... I think it's 50/50 for me...
Hmmm its a long wait now for me...I also in same boat with 50/50 chances. Come the result day and we know what are actually the results.BTW best of luck to me and then everybody waiting for the results
Suzanne Evans
Well-Known Member
Good luck to all!
Suzanne
Suzanne
Hi David,
i passed May Level I exam. Thanks for your good materials. I think ìll start for L2 right away. I just went through the L II exam questions and think they would really be good preparation questions for the exam. My question is, if its possible to summarize all shown questions from the last 14 pages with the 4 answers (when given) and the correct answers as well, because they are not really very neatly arranged. To collect all of the questions and answers from the 14 pages is a little hardSo best case would be a 80 questions block (if 80 questions are mentioned) with 4 answers for each question and 80 marked correct answers. Would that be possible?
i passed May Level I exam. Thanks for your good materials. I think ìll start for L2 right away. I just went through the L II exam questions and think they would really be good preparation questions for the exam. My question is, if its possible to summarize all shown questions from the last 14 pages with the 4 answers (when given) and the correct answers as well, because they are not really very neatly arranged. To collect all of the questions and answers from the 14 pages is a little hardSo best case would be a 80 questions block (if 80 questions are mentioned) with 4 answers for each question and 80 marked correct answers. Would that be possible?
Suzanne Evans
Well-Known Member
Hi Tom,
Are you referring to the mock exam?
I'm not sure I understand which questions you are referencing.
Thanks,
Suzanne
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