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 ERM Exam Old Advanced Finance and Enterprise Risk Management (ERM) Forum

#51
01-17-2018, 07:46 PM
 Actuary9914 Member SOA Join Date: Sep 2014 Posts: 55

in VAR chapter 8, page 196, the var% for GM is 14.01%.

In dollars, this is .1401*33.33 = 4.67.

if you divide 4.67 by 1.65, then divide by 33.33, = .085. .085 is the volatility.

Then the variance is .085^2= .0072.

So in the table, why is the covariance quoted as 72.17? Or more generally, why are they so large? It says numbers are reported in percentage monthly returns. So what does 72.17 as a percentage monthly return mean? It looks like the tables are showing the variances and covariances X 10,000.
#52
01-17-2018, 10:59 PM
 PaulP Member SOA Join Date: Jul 2013 Studying for ERM, CFE, SDM Posts: 1,152

Quote:
 Originally Posted by MySpaceTom I just ordered the SOA Study Notes. Does anyone know how long it usually takes for these to arrive? The Website says "Please allow up to two weeks for delivery". But, this seems like a painfully long amount of time during study season
It should be well less than that, but depending on where you are located, I suppose that could be the max time. I get mine usually in about 4 days (located in the US).
__________________
Paul - CFE/SDM/ERM Online Seminar Instructor

www.pakstudymanual.com
PAK Study Manual Packages/Seminars for CFE/SDM/ERM Spring 2018

SDM: Sample
CFE: Sample
ERM: Sample
#53
01-17-2018, 11:30 PM
 PaulP Member SOA Join Date: Jul 2013 Studying for ERM, CFE, SDM Posts: 1,152

Quote:
 Originally Posted by Actuary9914 in VAR chapter 8, page 196, the var% for GM is 14.01%. In dollars, this is .1401*33.33 = 4.67. if you divide 4.67 by 1.65, then divide by 33.33, = .085. .085 is the volatility. Then the variance is .085^2= .0072. So in the table, why is the covariance quoted as 72.17? Or more generally, why are they so large? It says numbers are reported in percentage monthly returns. So what does 72.17 as a percentage monthly return mean? It looks like the tables are showing the variances and covariances X 10,000.
You've got the right idea, and you are very close! One thing this text does from time to time is multiply their percentages by 100. So, you are correct, the volatility is 0.085 or 8.5%, but they would write this as 8.5, effectively dropping the percent sign.

From there, your math is spot on.
8.5^2 = 72.25 (off by rounding)

And, conceptually, this should be the same number as the variance you calculated, since the diagonals in a covariance matrix are just the variance of that asset. But, we have to remember to move the decimal over (or, conversely, add a % sign to our number).

And as long as you remember this convention they use, it's easy to get back to more usable values. For example, if we worked backward from 72.25, we'd come up with a volatility of sqrt(72.25) = 8.5. Using this texts convention, we know that this is actually a percentage, so we turn it into 8.5%. Multiply that by 1.645, and you get the VAR % they list in Table 8-3.

You can see an example of them using this right above Table 8.2. They say...

Quote:
 The market variance is V(Rm) = 11.90, which implies a monthly volatility of 3.45 percent
(Bolding is mine). So you can see they went from 11.90, took the square root to get 3.45, and then said "But wait, this is a percentage, pop a % on there."

That said, is it an annoying convention, especially since they don't make it clear? You bet it is.
__________________
Paul - CFE/SDM/ERM Online Seminar Instructor

www.pakstudymanual.com
PAK Study Manual Packages/Seminars for CFE/SDM/ERM Spring 2018

SDM: Sample
CFE: Sample
ERM: Sample
#54
Yesterday, 08:51 AM
 Actuary9914 Member SOA Join Date: Sep 2014 Posts: 55

Thanks Paul. That helped clear it up! The way they show the covariances was throwing me off.
#55
Yesterday, 12:10 PM
 Viki2011 Member SOA Join Date: Oct 2011 Posts: 211

Roughly speaking, what's the proportion of maths-y questions as opposed to the essay style questions on ERM SOA exam? I have not gotten to the papers yet to assess it myself but just wanted to have a rough idea.
#56
Yesterday, 01:20 PM
 PaulP Member SOA Join Date: Jul 2013 Studying for ERM, CFE, SDM Posts: 1,152

Quote:
 Originally Posted by Viki2011 Roughly speaking, what's the proportion of maths-y questions as opposed to the essay style questions on ERM SOA exam? I have not gotten to the papers yet to assess it myself but just wanted to have a rough idea.
It varies, and is affected a bit by what Extension you choose, but I would expect somewhere in the range of 25% +/- 5%.
__________________
Paul - CFE/SDM/ERM Online Seminar Instructor

www.pakstudymanual.com
PAK Study Manual Packages/Seminars for CFE/SDM/ERM Spring 2018

SDM: Sample
CFE: Sample
ERM: Sample
#57
Yesterday, 09:28 PM
 E Eddie Smith SOA AAA Join Date: May 2003 College: UGA Posts: 8,854

Quote:
 Originally Posted by goodfella7763 Hey everyone. I just found out I passed my last prelim so I'm trying to figure out where to go from here. I could use some help though, any ideas are appreciated! I really want to take an exam this spring instead of working on modules and delay sitting for an exam. It seems to make sense to take an exam and work on modules when the exam is being graded. That being said, would it be stupid to take the ERM exam before completing the ERM module? I enjoyed the little ERM exposure I got during the FAP modules so I'm pretty interested in it, but I'm following the GH track. I also think this exam will be a little easier to tackle than GHC. Just not sure what to do right now.
The main counterpoint to taking ERM first (or one of the track-specific 2-hr exams) is that a lot of the insurance-related concepts on ERM or G&H Specialty will be more meaningful after going through the 5-hr exams on your track first. People take the exams in all kinds of orders and do just fine, but I definitely talk to people who say they wished they'd taken the 5-hr exams first. The insurance-related concepts on ERM and the 2-hr exams tend to be at a very high level, and there is a lot of handwaving over concepts that get much deeper treatment on the 5-hr exams.

The key practical benefit of having a deeper foundation in the insurance-specific things is that it makes the syllabus more meaningful -- hence easier to remember and easier make sense of things that people might otherwise just skip over.

I would say that there is plenty of time to pass any of the upcoming spring FSA exams at this point, and I see tons of people pass the core exams when starting in January. Even though people start earlier than ever these days, sometimes I think having a more compressed and finite timeframe can be an asset because it increases the urgency "per hour" of study time.
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#58
Yesterday, 10:24 PM
 ActurialMike Member CAS SOA Join Date: Aug 2014 Posts: 432

I have a quick question for the TIA staff. My method of studying for the last two FSA exams was to print out the flash cards on two sides using the fancy "flash card" paper. I then memorize as much of those flashcards as I can. It looks like these printable flash cards do not exist in the ERM study materials? Is this method of learning not as helpful for the ERM exam? Sorry in advance if I just missed it.
#59
Yesterday, 10:52 PM
 E Eddie Smith SOA AAA Join Date: May 2003 College: UGA Posts: 8,854

Quote:
 Originally Posted by ActurialMike I have a quick question for the TIA staff. My method of studying for the last two FSA exams was to print out the flash cards on two sides using the fancy "flash card" paper. I then memorize as much of those flashcards as I can. It looks like these printable flash cards do not exist in the ERM study materials? Is this method of learning not as helpful for the ERM exam? Sorry in advance if I just missed it.
We didn't want to promise the printable flashcards for the spring 2018 sitting because we weren't 100% sure that they will be ready this sitting. Our flashcard apps will be fully updated, however, and we are planning to bring in as much of these "unpromised" items that we can in the amount of time we have left for this sitting -- while maintaining the standard of quality we want for each of them. The flashcard apps have gotten an incredibly strong response and usage of them actually exceeded our expectations last sitting. The convenience is hard to beat.

As for which method of learning is best for ERM, I think any successful method you applied to the 5-hr exams will also work for ERM. For ERM, there are a lot of lists, and we cover all of them in our video lessons. I think it makes a lot of sense to print the lesson handouts (maybe not on that fancy paper) or keep them in tablet that allows you to handwrite on them digitally. I think it is a very good idea to make notes on them and even practice memorizing the lists as you study. I talk to lots and lots of folks that follow this approach on the way to passing.

I think if you can regularly make notes on those handouts, review them, and also use the flashcard apps, that will provide a really good system for memorization.
__________________

Learn how FSA exams are different from the prelims

LP | LFV-U | LFV-C | LRM | ERM | QFI Core | QFI Adv | QFI IRM | G&H Core | G&H Adv | G&H Sp

Check out our Technical Skills Course and our new R Course!

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