Test 2 for Market Risk Management (FRM Part-II)

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Test 2 for Market Risk Management (FRM Part-II)

Postby swarnendupathak » Wed Oct 02, 2013 11:57 am

In Test 2 of Market Risk about 99% of the question are from Part 1 regarding pricing of option by using Put Call Parity, FRA, SWAP etc & hardly one question from Volatility smiles. So is there is any chance of getting such L1 question in L2 exam??? Please reply

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Test 2 for Market Risk Management (FRM Part-II)

Postby shreyas » Tue Oct 08, 2013 8:19 am

Certain Questions in the Market Risk Section which may be more inclined with FRM I aims have been intentionally kept since they are the starting point for FRM II aims and the same concepts can be retested in FRM II. Also all the concepts of FRM II have been covered and these questions are in addition which does not compromise with our FRM II questions set.

Specifically concepts on calculation of VaR, Black & Scholes and Term structure of Interest Rates(Forward vs Spot rates) have been covered.

VaR has been covered in multiple chapters where they directly come up with VaR numbers without getting into detailed calculations. Thus, some VaR questions will help those who are not very comfortable with concepts of VaR

Black & Scholes for option valuation has been discussed since exotic option can be expressed as a combination of plain vanilla call and put options whose value can be derived from computing values of call and put options. Additionally, Merton model is based on the BS concept, thus this will also help in Merton model questions

Forward vs Spot rate concepts have been discussed in Science of Term Structure models which is used for convexity measurement.

Net Swap Payments – They are similar to variance/volatility swap concepts which are covered in Exotic options chapter.Difference is the underlying is interest rate instead of volatility.

Most importantly, all concepts on FRM II have been covered and these concepts are an add on since many are not comfortable with the above concepts.

Return to “FRM Part II”



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