Past exam papers and level of detail

[DA Taylor]

I have two questions on SA6:

1. I notice that in recent past exam papers the answers given in examiner's reports are extremely theoretical. For example, there was recently a big question on QE tapering and the answer focused only on the theoretical effects, completely ignoring the significant and important issue of sentiment-driven effects, which most often (currently) cause markets to move in the opposite direction to the theoretical effect. This was not covered at all and if I had answered this question in the exam I would have mentioned the theoretical effects but focused on sentiment-driven effects as this is, I believe, far more topical in the "new normal" markets of today.

Please can someone give some guidance on this - my understanding was that the SA exams require practical, current knowledge on issues and not theoretical knowledge?

2. I have also noticed in examiners reports that often concepts are explained before the actual question is answered. For example, there is a question on the risks of an unsecured loan investment - the answer describes the concept of providing unsecured loans and then only mentions the actual risks. What level of knowledge are we to assume our "audience" has? I would have thought we can skip the basic descriptions of concepts and get straight into the meat of what the question is asking? For example, when describing risks shouldn't we rather describe the important, specific, unique risks relating to the issue in the question, instead of describing what a liquidity risk is, for example? I know it needs to be mentioned, but do we need to explain what it is?

 

[Colin McKee]

These are hard to address with confidence as it does sometimes change from question to question. I generally say in tutorials that both the theoretical and the practical market ideas should be covered, and that it is a danger for someone who works in the markets to get too involved in the detail (which they may be aware of and expert in) and miss the theoretical. What is important to a market practitioner and an examiner can be different, and the examiner will often have far more theoretical than you expect.

On the second topic, I usually say that it depends on the marks available. If you tackle the question face-on, and give it all you have got, then look at the marks and you are only half-way there, then the chances are that you need to broaden the question. This may mean defining key terms, describing different types of loan stock, or giving examples of what you have already explained. Perhaps explaining how something is carried out or implemented, ... Basically, the examiners report will consist of a few single marks, but plenty of half marks, and you need to get your answer to a level that has a chance of getting you a good pass.

I know this is not a scientific answer, but its a hard question to be definitive about (sorry).