Pictorial Questions for FRM part 1

[mastvikas]

Hi David,

I request you to please post some pictorial questions . There are 5 to 6 questions that comes / expected to be seen on exam purely based on diagrams /curves . i.e which is risky asset , foward curve , some from valuations as well. 2012 nov there were 4 to 6 in total

Regards,
Vikas

 

[David Harper CFA FRM]

Hi Vikas,

Can you be more specific, please? I try to employ exhibits, but I maybe missed among the feedbacks (e.g., http://forum.bionicturtle.com/threads/frm-level-1-nov-2012-feedback.6527/ ) where specifically the exam depended on pictures. By risky asset, do you mean like identify the minimum variance point or market portfolio, i can imagine a pictorial question w.r.t. CAPM/CML/SML and re forward curves (maybe contango versus backwardation) but not sure about valuations. Any specifics would be helpful and I'll try to include, but it first depends on the sequence (right?): I write daily questions according to sequence, currently I'm at Miller (P1) and Malz (P2.T6) and i really write to the AIMs, thanks,

 

[mastvikas]

Hi David ,

Here - i have requested kindly post some graphical questions as well because it is tested . i have gone through the forum and it has been mentioned over there too by "Risknoob". Yes question/explanation should come in a sequence , i just wanted to bring to your notice. i have appended the below screen shot for your reference.
Regards,
Vikas

 

[David Harper CFA FRM]

hi vikas, thanks, did you mean to append a screen shot? thanks,

 

[mastvikas]

Hi David, Yes i did but don't know why it did not come through /neither i am able to attach the doc. I am just copy pasting the words written from there to this discussion.

• I found early questions were quite difficult compare to the later ones, so I initially skipped those questions. for example

- the first question was tricky - risk measure that cannot be controlled by risk manager (this is not clear, so someone could fill this one)
- pricing bond (so that no arbitrage opportunity exists by REPLICATING portfolio)

• Also there were few graph questions such as

- given spot curve, what would corresponding forward curve look like?
- pick the scatterplot (of asset returns vs. market returns), I think we need to pick beta close to 1
- shape of the (efficient) portfolio possibilities curve (concave)

 

[[email protected]]

Yes, exactly. I understand what Vikas is talking about. On the latest Nov 2012 FRM exam there were questions that dazed me a lot like for instance: please specify if the 3 month forward curve looks like this, and spot curve looks like this (first ascending, then slightly descending) how then looks 1 months forward curve (and variants - ascending and then slightly descending or another variant dips well below zero and becomes negative with negative forward rates). It`s a practice question - isn`t it? And furthermore there were some questions dedicated to option strategies that I`ve never seen before - it was not about our strangles, straddles, usual bear or bull spreads - it was some mixture depicted in the diagramm - butterfly with protective put or covered call or somewhat like this.

David please can you find some questions like this - about options and forward curves - cause these questions were really very tricky!

Thanks beforehand!