Thoughts on this year's mock difficulty, including, although, everyone, expected

pawn

Took the Mock Exam today--didn't think it was too bad although a few tricky questions. Scored a 73.33 (44/60) but made a couple of really dumb mistakes including circling the correct answer and bubbling in the wrong answer in one instance. Honestly, I would be content if this was the difficulty level of the actual exam. I expected worse. What were everyone else's thoughts?

Additionally, two quick questions on this exam.

19. I was able to get the price weighted index % change, but is there a way to calculate the equal weighted index % change to confirm it is less?

49. Why is the answer a binary credit option and not a credit spread option? I know in the text it says that a binary credit option prevents downgrade risk, but I thought that the two were identical--just one was on the price and one on the rate.

Darien

19. I asked this question earlier. The consensus was to take an equal weight in the change in price as opposed to the change in mkt value.

lcai

Don't argue with me regarding these answers. You have a tendency to do that. ;)

skycfa

Downgrade risk can be hedged via credit options (Schweser Book 3 page 102).

There are two types of credit options. If based on price, then it is a binary credit option. If based on yield, it is a credit spread option. (Schweser Book 3 page 84).


Thus, to me, binary credit options and credit spread options should both work.

aidebaobao

Both should work, but I believe the mock mentioned she was looking to hedge a specific event (crossing over from investment grade to below investment grade).

pennyless

Binary credit options pay on a specific thing. i.e. Credit down yes/no. 1/0

bodhisattva

so how does that give it away that it is binary?

Windjam

Required reading, glossary, binary credit option "options that provide payoffs contingent on the occurrence of a specified negative credit event."