I had also the blue book but I did not pay attention if it was stock or future. But I am afraid it was a future as the price range was near 3000 (as I see on this thread). That said, I don’t remember if the price was really around 3000 or not.
Exam Feedback November 2019 Part 1 Exam Feedback
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I think I read the question thrice and calculated thrice , in exactly the same way , but couldn't get the answer.
Hi Guys,
I had the red booklet. I felt 2 questions had incorrect answers listed. They are the Q1 and Q2 in the list below. Please let me know if anybody else also faced this same dilemma.
1. EWMA related
Lamda=.89
Return = 4.02%
Volatility = 2.07%
Ask: volatility of today?<Error in options as per me, couldn't locate the right answer>>
2.Delta neutral <Error in options as per me>>
1.1500 long option (answer)
No hedge for delta there for the additional options added coz of hedge; exactly similar question there in BT Book 4; Greek Letters
3.Price declined from 0 to 40 linearly
Ask : Probability( 15 or less is stockprice)= 62.XX
4.Binomial 1 step
5. when will option price calculated by BSM and Binomial Tree converge ?
Answer: with more steps of Binomial tree
6. Risk Reporting and data aggregation: 3 Questions
7.Tailing hedge
8. Wrong way risk If not mark to market : CCP risk <Not sure this was the answer>
9. CCP netting and margin : multilateral netting
10. CCP: moral hazard
11. Netting exposure: net exposure between counter-parties
Thanks!
I had the red booklet. I felt 2 questions had incorrect answers listed. They are the Q1 and Q2 in the list below. Please let me know if anybody else also faced this same dilemma.
1. EWMA related
Lamda=.89
Return = 4.02%
Volatility = 2.07%
Ask: volatility of today?<Error in options as per me, couldn't locate the right answer>>
2.Delta neutral <Error in options as per me>>
1.1500 long option (answer)
No hedge for delta there for the additional options added coz of hedge; exactly similar question there in BT Book 4; Greek Letters
3.Price declined from 0 to 40 linearly
Ask : Probability( 15 or less is stockprice)= 62.XX
4.Binomial 1 step
5. when will option price calculated by BSM and Binomial Tree converge ?
Answer: with more steps of Binomial tree
6. Risk Reporting and data aggregation: 3 Questions
7.Tailing hedge
8. Wrong way risk If not mark to market : CCP risk <Not sure this was the answer>
9. CCP netting and margin : multilateral netting
10. CCP: moral hazard
11. Netting exposure: net exposure between counter-parties
Thanks!
Absolutely, I even remember the question. The ask was 'volatility' => sqrt( variance of today) but the answer was nowhere. I wasted some time on this before being sure that I am not goofing up somewhere. However, it's best to wait check the feedback of the community as exam pressure can make one delusional at time
For me, this is a uniform probability distribution :
3.Price declined from 0 to 40 linearly
Ask : Probability( 15 or less is stockprice)= 62.XX
P = (15 - 0) / (40 - 0) = 0.357
Sixcarbs
Active Member
It was definitely a Uniform Distribution question.
I put 62.50 at first, and then changed it to 37.50. Not sure which is correct.
I also thought that to be the answer initially but how it can 'decrease' from 0 to 40
?Forgive me if I am mistaken
I also thought that to be the answer initially but how it can 'decrease' from 0 to 40
Forgive me if I am mistaken
Weird indeed.
How do you find the 62.xx ?
1-.375=62.5%
P = 1- (15 - 0) / (40 - 0) = 0.625 i.e. assuming it's decreasing from 40 to 16.
Please let me know your thoughts.
I did the exact opposite while marking the answers
Regarding 5, i think i didnt have that answer option ( more steps lead to convergence). I think i chose an answer saying the volatility in the binomial is constant in each time step..anyone remember? (Blue Book)
I also thought that to be the answer initially but how it can 'decrease' from 0 to 40
Forgive me if I am mistaken
Was the number 15 stated as stock price or a decline yield? If it's a decline yield, 62.5 would be the correct answer. But if it's a stock price, I would assume 0 and 40 are the stock price range possibility and then 37.5 would be correct. Otherwise, I find the question too much tricky.
I think both BSM and BinoTree assume constant volatility, don't they ? Don't remember this option being there in the redbooklet qs
Maggie3344
New Member
I remember it was future o
I have the blue book and I remember the question was what is the probability that the stock price decreased less than 40? My answer was 62.5.
Maggie3344
New Member
I remember reading this" for European options, the binomial model converges on the Black-Scholes formula as the number of binomial calculation steps increases. "
It was stock price as per my note that i made immediately after the getting out of the exam venue. Considering a 'uniform, linear decline' emphasized in the question, i felt the question was worded in a tricky way to confuse candidates but since the assumption was 'linear and uniform decline' , i assumed that it has to decrease from 40 to 16.
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