Exam Feedback November 2017 Part 2 Exam Feedback

[Nicole Seaman]

We hope that everyone did well on the FRM Part 2 exam on Saturday! We would love to hear any feedback that you have about the exam. How did it go? Did you encounter unexpected questions? Thank you in advance for any feedback you can provide!

 

[trigg989]

Holy moly was that exam wordy. I came out of the exam room feeling that I read through an entire novel.

 

[slacknoise]

Hi Nicole

I think the exam was absolutly doable even though i do not want to celebrate victory yet. I thought the official trial exam on GARP's website was a pretty good benchmark this time, which for the part I exam in May was not the case at all.
If there was a long wordy question with an additional table, i figured it made a lot of sense to just skip everything and go to the question right away. At least 4 times, the majority of the text and table was not even needed. I just felt spammed, but at this time you could obviously anticipate spamming, based on the part I experience.

Thanks a lot to the BT hosts for providing this platform. I would have been lost without it.

cheers and good luck to everyone.

 

[trigg989]

Hi Nicole

I think the exam was absolutly doable even though i do not want to celebrate victory yet. I thought the official trial exam on GARP's website was a pretty good benchmark this time, which for the part I exam in May was not the case at all.
If there was a long wordy question with an additional table, i figured it made a lot of sense to just skip everything and go to the question right away. At least 4 times, the majority of the text and table was not even needed. I just felt spammed, but at this time you could obviously anticipate spamming, based on the part I experience.

Thanks a lot to the BT hosts for providing this platform. I would have been lost without it.

cheers and good luck to everyone.

I agree with your sentiment on the wordy questions, and that's the strategy I went with after the first couple of vignettes. Good to luck to you!

 

[bake5472]

Agreed. Skimming "the story" was generally the best approach, and if you needed additional information that was pretty obvious after reading the question.

Certainly a good number of qualitative questions.

One thing I noticed is that the forum on the last part 2 exam indicated there would be numerous mapping questions. I only remember 1-2 of those on this exam and they were pretty straightforward.

 

[monachima505]

For the Bitcoin one, did anyone else select the option that said something like, a single hacker can destroy the blockchain?

 

[slacknoise]

monachima505, i think thats wrong. Internal conduct and regulation would be rather a concern, since your counterparty is not necessarily known in a bitcoin settled transaction.

 

[hsitaolee]

I find out the difficulties among questions are very different: Some are really easy, like most CI questions, while others are very
"creative" and challenging.

1.RAROC: Which combination of transaction would lower RAROC below the company's limit.
2.NSFR: Which combination of arrangement would remain NSFR ration at 100%.
3.Ho Lee calculation
4.Vasicek calculation
5.LVar calculation: Trade position is small so won't have significant impact the market price(Exogenous approach)
6.Negative interest rate
7.Bitcoin
8. Compare 3 methods of FI securities mapping

 

[Martin B]

monachima505, i think thats wrong. Internal conduct and regulation would be rather a concern, since your counterparty is not necessarily known in a bitcoin settled transaction.

I selected the same answer.

 

[monachima505]

monachima505, i think thats wrong. Internal conduct and regulation would be rather a concern, since your counterparty is not necessarily known in a bitcoin settled transaction.

Hmm, I had decided against that one because I specifically remembered the reading mentioning that a feature of Bitcoin is the lack of anonymity, and the fact that transactions can always be traced back to the individuals who were involved. I could be wrong though.

 

[trigg989]

monachima505, i think thats wrong. Internal conduct and regulation would be rather a concern, since your counterparty is not necessarily known in a bitcoin settled transaction.

I vaguely remember the question. Was it which answer is correct or which answer is not correct?

I feel like I answered that one correctly but I hope I didn't misread the question.

 

[slacknoise]

would be extremly costly though to track the BTC transaction and probably not feasible. Additionally, i am quite sure it would take way more than 1 hacker to destroy the blockchain due to consensus infrastructure. We might never know the correct answer though.

 

[JayJayK]

I felt this is a very quality exam to my surprise comparing to Part I - think a good 70%. A lot of the questions left me hanging with 2 options after having only successfully eliminated two other.

 

[Dipanjan]

I did not prepare well this time(50 days prep) and was expecting a tough paper from GARP like part 1.
But post the exam I think I have a decent chance. This paper was slightly on the easier side than the GARP Mock.

I checked the May thread and I believe few qs are ditto (like WWR, ES calculation, Security Selection return etc). In first half I got entangled with verbiage but the next half I stopped reading those unecessary stuff and could finish in time.

Schweser is good enough to pass it in combination with BT question bank.

For Bitcoin, Governance one is the right answer, as Bitcoin Blockchain is pseudoanonymous hence will take sufficent energy to traceback txns which is a gov issue. A hacker can hack applications - like wallet,exchanges(which are running on top of the blockchain platform) but not the blockchain itself. There is a theoritical possibilty to alter history but without qbit processors, which are not yet developed it will take years to do it,hence SHA -256 Ellyptical cryptography is fullproof.
PS:I am a crypto enthusiast and investor

 

[CheckItOrWreckIt]

I find out the difficulties among questions are very different: Some are really easy, like most CI questions, while others are very
"creative" and challenging.

1.RAROC: Which combination of transaction would lower RAROC below the company's limit.
2.NSFR: Which combination of arrangement would remain NSFR ration at 100%.
3.Ho Lee calculation
4.Vasicek calculation
5.LVar calculation: Trade position is small so won't have significant impact the market price(Exogenous approach)
6.Negative interest rate
7.Bitcoin
8. Compare 3 methods of FI securities mapping

1. I chose the option where the EC goes from 60 t0 80 (purely on the rationale that the denominator is increasing more than the numerator so ratio likely to come down)
2. I selected the 7Bn in short-term secs + 2bn in cash on the logic that denominator will increase by 5 and numerator will increase by 5.5 (7 * 0.5 + 2*1). Thus should preserve the NSFR above 1.
3. Don't remember
4. Don't remember
5. I chose exogenous approach as well
6. Don't remember
7. Governance being the main issue with BTC as all the details of the trade counterparty are not readily available
8. Cash flow mapping produces a lower var than principal mapping since it takes into account interim cashflows.

I don't know if any of these are right or not though.

 

[bake5472]

1. I chose the option where the EC goes from 60 t0 80 (purely on the rationale that the denominator is increasing more than the numerator so ratio likely to come down)
2. I selected the 7Bn in short-term secs + 2bn in cash on the logic that denominator will increase by 5 and numerator will increase by 5.5 (7 * 0.5 + 2*1). Thus should preserve the NSFR above 1.
3. Don't remember
4. Don't remember
5. I chose exogenous approach as well
6. Don't remember
7. Governance being the main issue with BTC as all the details of the trade counterparty are not readily available
8. Cash flow mapping produces a lower var than principal mapping since it takes into account interim cashflows.

I don't know if any of these are right or not though.

6. I can't remember either for sure - though I think there may have been an answer about depositors being shielded from the negative rates, which is true.
7. Definitely chose the governance/regulation related answer
8. I agree with you - same answer.

 

[Dipanjan]

From Memory

1. Es - 2
2. vasicek - Ex rate in 2 years
3. Ho Lee
4. Hypothesis Test with Backtest
5. OIS - LIBOR forward rate
6. Graph identification - jump - frown
7. Equation given with Mean Reversion find autocoreln
8. Mapping - Qualitative qs on selecting the least impacted btwn PM, DM, CFM
9. Lognormal Var calculation
10. Bootstrap vs Var-Covar method effectiveness etc
11. LDA
12. Marginal DP - yearwise data given
13. Spread given MV and FV
14. Securitization qs on Credit Risk and Market risk
15. Hazard Rate given Spread and RR
16. DVA
17. CVaR calculation
18. Exposure of Cross Currency Swap
19. CCP vs Billateral Netting
20. MERTON model vs Moody's model effectiveness
21. Bitcoin - risk issue
22. NRP - problem identification
23. Funding Liquidity Risk
24. Debt in Emerging economy - 2qs - Loan raising impact - Risk for domestic borrowing when external debt raising halts
25. HFT risk
26. IVAR calculation
27. Portfolio VaR calculation when there is a VaR limit
28. HEDGE fund - event driven characteristics
29. Security Selection return calculation
30. Stratefication vs LP vs Quadratic
31. OPS risk Line of Defence and few more qs from first 4 chapters
32. NSFR - B/S given and altering done - what is the impact
33. BI vs SMA
34. MEVT - u and CL go up and Dow
35. Basel related qualitative - 3-4 qs I guess - LEV ratio impact etc Tier 1 capital impact - policy change applications
36. Outsourcing partner selection
37. LVaR exogenous approach
38. RAROC given but Economic Capital and return is changing - which will keep things under limit

 

[rkoki]

Appeared for Level 2: Not sure if these words/concept appeared in paper.
-Copula
-securitization
- Ordinal Measures
-Waterfall structure
-ERM

 

[zahra.saied]

Although it wasn't an easy exam, I actually enjoyed the paper. I think it helped that the first few questions were relatively easy which gave me a boost and I was ahead of time. This time, fortunately, time was not my biggest enemy as was in FRM level 1.

As for Bitcoin, I agree the governance is the issue and that is one of the biggest risks in Bitcoin today. Although you can trace the transactions, you can't find who is behind the block as there are no verification done when creating the account. That is why it is thought that Bitcoin can be used for money laundry and for illegal services.

 

[Navneet02]

From Memory

1. Es - 2
2. vasicek - Ex rate in 2 years
3. Ho Lee
4. Hypothesis Test with Backtest
5. OIS - LIBOR forward rate
6. Graph identification - jump - frown
7. Equation given with Mean Reversion find autocoreln
8. Mapping - Qualitative qs on selecting the least impacted btwn PM, DM, CFM
9. Lognormal Var calculation
10. Bootstrap vs Var-Covar method effectiveness etc
11. LDA
12. Marginal DP - yearwise data given
13. Spread given MV and FV
14. Securitization qs on Credit Risk and Market risk
15. Hazard Rate given Spread and RR
16. DVA
17. CVaR calculation
18. Exposure of Cross Currency Swap
19. CCP vs Billateral Netting
20. MERTON model vs Moody's model effectiveness
21. Bitcoin - risk issue
22. NRP - problem identification
23. Funding Liquidity Risk
24. Debt in Emerging economy - 2qs - Loan raising impact - Risk for domestic borrowing when external debt raising halts
25. HFT risk
26. IVAR calculation
27. Portfolio VaR calculation when there is a VaR limit
28. HEDGE fund - event driven characteristics
29. Security Selection return calculation
30. Stratefication vs LP vs Quadratic
31. OPS risk Line of Defence and few more qs from first 4 chapters
32. NSFR - B/S given and altering done - what is the impact
33. BI vs SMA
34. MEVT - u and CL go up and Dow
35. Basel related qualitative - 3-4 qs I guess - LEV ratio impact etc Tier 1 capital impact - policy change applications
36. Outsourcing partner selection
37. LVaR exogenous approach
38. RAROC given but Economic Capital and return is changing - which will keep things under limit

Good memory , yup most of the questions appeared in exam.
I thought we had an % asset allocation question rather security selection and I Remember answer was .28%, 29th question in the above list.do U agree with the same ?