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QFI Core Exam Old Advanced Portfolio Management Forum

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  #1  
Old 05-12-2007, 07:11 PM
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rekrap rekrap is offline
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Default 2007 APMV Exam

Here's a thread to discuss issues specifically related to the 2007 exam.

For example, this question:
Quote:
Originally Posted by bagheera View Post
Did anyone notice that the material referred to in problem 13 relating to the explicit finite difference and Crank-Nicholson method is not on the syllabus? Only 17.1-17.3, 17.6 and 17.7 from Hull are included in the syllabus. The methods referred to in the question fall under 17.8.
or about the GMAB question in the afternoon or the morning Case Study questions (e.g., #3 asking for specific ratios to be calculated) or whatever else you might like to discuss.

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Old 05-12-2007, 07:26 PM
Jason Jason is offline
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How did everyone find the exam? When I first started out with the material i had an impending sense of doom each time I turned a page. But then towards the end I felt I had a chance. But now after the exam I'm back to square one and will definitely be back in May. There was just too many things to remember. Most of the questions looked familiar but just could not recall the points or the calculations
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Old 05-13-2007, 10:22 AM
bagheera bagheera is offline
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Quote:
Originally Posted by rekrap View Post
Here's a thread to discuss issues specifically related to the 2007 exam.

For example, this question:


or about the GMAB question in the afternoon or the morning Case Study questions (e.g., #3 asking for specific ratios to be calculated) or whatever else you might like to discuss.

I looked at the GMAB question, vaguely realized that it required me to either recall the benefit formula for two rollovers or derive it, either of which appeared to very difficult at that time, and so I eventually left it. I didn't stop to think of any "trick" method. I did attempt the two point part b) though.
I couldn't do the case study question 3 well either. I just did not know what to do about what they were asking in b) and c)! d) was not great either.
I thought I knew VAR well, but I was mistaken. How was individual VAR to be calculated? I took the returns into consideration and calculated relative VAR instead of mean absolute VAR. If I am correct, I must thank someone on the forum who posed a question about it. But I could not attempt the later part of the question well. I failed to recollect that the correlation being negative a short position is, in principle, plain wrong! I suppose the Baring's bank disaster was an outcome of a similar attempt to hedge. And so I continued getting foxed in part b and c. How was portfolio VAR to be calculated?
Overall, I felt the afternoon session was more difficult. In general, I felt they were testing basic concepts in the morning session and some relatively complex stuff in the afternoon session.
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Old 05-13-2007, 01:42 PM
hershey220 hershey220 is offline
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Originally Posted by hw0799 View Post
I forgot it is afternoon session or morning session, a question asking to calculate distance to default and prob. of default by using the expected growth rate. But that question only give MV of short term debt, not the face value. It also dose not give the risk free rate, so I can not infer the face value of short debt from Market Value of short term debt.

how anybody get around this problem? Thanks.
I used the formula for DD on p 23 of the formula sheet. The risk-free rate is not used and DPT=short term debt + .5*long term debt.
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Old 05-13-2007, 02:22 PM
bagheera bagheera is offline
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Quote:
Originally Posted by hw0799 View Post
if I remember correctly, you need to use the face value of debt.
the question gives you the market value.
If you think the question is wrong, I suggest you write to the ombudsperson as soon as possible. Even I vaguely recollect to have done it using the formula and got DD as 8 resulting in the rating to be AAA. I got the maximum long term debt issuable as 793 for the second part. Did anyone get similar answers?
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Old 05-14-2007, 05:17 AM
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Don't worry about knowing the specific question number. Just give enough information to identify the question.

The email address is: ombudsperson@soa.org

I don't know what they'd do with the face value/market value issue, but I don't think they'd throw the question entirely out over that (they may change the grading outline, though) -- as opposed to the question on finite difference methods that wasn't on the course of reading at all (which I assume they'll just omit).
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Old 05-14-2007, 10:16 AM
bagheera bagheera is offline
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Quote:
Originally Posted by hw0799 View Post
I am writing email, if anybody remember the quetion number, or in morning session or afternoon session , please let me know.

I did not know I could write to SOA about this, so I did not put the quesiton number down
It was definitely in the morning session, and not so definitely question number 6. I have started to recollect bits and pieces of it, and even I doubt whether 300 was explicitly specified as the "market value of debt". The data given were in this form:
Value of assets=1000
Short term debt=300
Long term debt=0
...
In such a case, I would treat 1000 as the value of assets, and 300 as the face value of debt. Even in the exam, I just looked up the formula and blindly substituted the values. I did not feel the slightest amount of unease about doing the problem the way I did..
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Old 05-14-2007, 10:33 AM
carzymathematician carzymathematician is offline
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Quote:
Originally Posted by bagheera View Post
It was definitely in the morning session, and not so definitely question number 6. I have started to recollect bits and pieces of it, and even I doubt whether 300 was explicitly specified as the "market value of debt". The data given were in this form:
Value of assets=1000
Short term debt=300
Long term debt=0
...
In such a case, I would treat 1000 as the value of assets, and 300 as the face value of debt. Even in the exam, I just looked up the formula and blindly substituted the values. I did not feel the slightest amount of unease about doing the problem the way I did..
The question stated that the Market Value of 1-yr debt = 300 and the Market Value of 10-yr debt = 0. I also got 8 but the table didn't have a DD = 8, I think the DD was maxed out at 5 so I actually thought that my figure was wrong..
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Old 05-14-2007, 11:13 AM
AggieAct02 AggieAct02 is offline
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I'm feeling a little better now. It seems like the questions I had trouble with are the ones that others had trouble with too. I'm glad I wasn't crazy about having never heard of the Crank-Nicholson method. Let's hope that gets tossed.

I got 8 for the DD in that problem too and I think something like $799 for the long term debt. I also just used the values given without adjusting for market value. I think that would have been reading too much into the information given. Even if it wasn't, I doubt that you would lose too many points for that. I think the majority of the question wanted to know if you could identify the KMV and if you knew the formula for DPT. I actually thought that was one of the more straighforward questions in the afternoon.

I had problems with the Individual VaR problem too. I got reasonable answers for the marginal and portfolio VaR, but when I tried to calculate the optimal hedge I got something huge. I just wrote that I thought I had gotten off in my units somewhere.

I actually laughed when I saw the numeraire question in the afternooon. I never did get martingales and numeraires so I had skipped memorizing that. Of course it would come up.

I was really disappointed that the last case study question was so many points. I just didn't memorize that material and I don't remember there being much more to it that some big lists.

On the GMAB question, I treated it as 3 separate puts contingent on the probability of survival and then added them together. I didn't answer the second part about how to hedge the liability. I think I got started but ran out of time.

Overall, I would say that 80% of the exam was fair, obviously excepting the question that was not on the syllabus. The afternoon was considerably harder than the morning IMO. I also thought that the case study questions required very little knowledge of the case study, which for my part I was pretty happy about.
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  #10  
Old 05-14-2007, 11:56 AM
bagheera bagheera is offline
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Quote:
Originally Posted by AggieAct02 View Post

I had problems with the Individual VaR problem too. I got reasonable answers for the marginal and portfolio VaR, but when I tried to calculate the optimal hedge I got something huge. I just wrote that I thought I had gotten off in my units somewhere.
Would you be interested in discussing how you did VAR? I won't really mind if you are not.. I think I did not do too well on that question, and am a little curious to know the solution..
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