Can anyone tell me, from which core-reading topic Q2 was based on? I don't think SA6 core reading had made any reference to pension risk management policy, was this from CA 1,2 ?
I don't think it was really based on any of the core reading, or at best only very loosely. Thoughts that sprung to my mind are the areas in ST5 (and perhaps one question I recall from SA6 past papers) based on using standard measures of risk for hedge funds, where there are asymmetric returns and all sorts of unknowns that can't be adequately captured. I know the situation was a pension fund but there was, I think, quite a bit of LDI in play. Therefore lots of other risks not captured by standard measures like tracking errors and VaR, particularly historical based measures if there's not been a collateral/counterparty/liquidity event in the observed data. That's my take on it anyway. I could probably think of a lot more to write on this now that I'm not in the exam room...
It's nothing. you have a funny username. I wondered how long have you been battling against SA6. Its very difficult to answers questions like that in a three hour exam. Since they wanted a risk management "policy", i wrote something like: Define Risk Metrics Calculate the defined metrics and compare against benchmark If needed, alter asset allocation to bring the risk measures within the threshold Something on Frequency of Reporting I don't know if it is correct or not, but it is quite likely i'll not get through this attempt either. This was my fourth attempt, and i still have no idea of how to prepare for SA6.
