Hi everyone I have being practicing the appropriate questions in old CT8/109 exam papers as additional practice for ST6. I wrote (and passed) 109 back in April 2002 and have found that the standard of 109 has increased significantly over the last 3.5 years. A particular problem that comes to mind is an exchange option using the B/S model in the April 2003 exam paper. I think exchange options are coverd in Hull (as well as other exotics). To my mind if 109 has increased in difficulty that would mean ST6, which can be viewed as CT8's "big daddy", would then also increase in difficulty (as can be seen from the last two St6 papers). Another problem that seems to pop up quite regularly are State price deflators. When I wrote 109 that section of work was on pricing kernels (I've pretty much forgotten most of it) but now the Acted notes for CT8 covers state price deflators. (I think they are the same thing) The 109 exam questions have covered state price deflators more generally covering shares. Now our ST6 does not cover much in the way of state price deflators. Do you guys (and ladies!) think that we should be looking at these state price deflator problems in the 109/Ct8 papers? As a side note I noticed that there are also a few errors in the 109 solutions (more than just "typos"!). And we all know by now that the ST6 solutions have also got errors in them. Also some of the ST6 questions were beyond thye syllabus (we all know that). Thus I found Margaret Flaherty's reply to Andrew Smith (latest Actuary in the letters section) very interesting. There are apparently many points at which Actuaries check the exam and solution. Don't you find it astonishing that such ST6 papers (and solutions) still result?! Thanks
the errors in these types of papers, strikes me as a reflection of the inexperience of the actuaries writing the exams - they never studied these areas in their exams, so are effectively not qualified to write the exams. these types of exam should be set by academics rather than actuaries (at least until the new breed of actuary is well established).
Hi Gareth I think you have made a very apt point there. I think that Financial maths is a fairly new and rapidly growing field and Actuaries want to be part of it. At the moment however I don't think the actuarial exams cover this area sufficiently and in enough depth. I think that the examiners could also do some checking up with Acted before the exams are written. (I think Acted only looks at the papers after the students have actual written the exam - that doesn't help us students much!)
good morning to mtm and gareth gareth - on the other posts, i was asking about the the utility of other books like wilmott etc from the utility of knowledge acquisition rather than applicability to passing ST6 - it is clear that 700 pages of hull is (unfortunately!) the most important thing to do for st6 judging by history, and whilst baxter and rennie is a lovely read, it seems you only get one nice question (girsanov/martongale rep theoerm) in ST6 on baxter/rennie occasionally! mtm - you and gareth both pointed out "typos" in ct8 and st6, note the ambiguity of teh word "typo" - - given this observation of dubious solutions, and the comments you and I made on another post about september 2005 question 3 (the protfolio of puts), is it generally accepted that the delta/gamma should have be been derived for a portfolio of short puts as opposed to the the examiner solution which derived it for long puts ( i havent seen ASET although mike lewry pointed out that "typo" was his way of being polite to Examiner report) gareth - what's your view on the interpreation issues in q3 sept 2005 - are we short puts as opposed to long puts (as examiner thought) and hence end up positive delta as opposed to negative delta (as examiner thought) gareth - i know there was some disagreement on another post that actuaries need better knowledge of stochastic calculus, ....but first any "typos" have to be avoided before they can make giant strides into quant finance! have a nice day
I've read about 50% of Wilmott's book over the last few years, just as general interest, but so far i haven't felt the need to look anything up in it for ST6. i think any background knowledge is helpful, but clearly there is limited time to study, so you have to make the best use of it. I think Baxter&Rennie is essential reading to understand the martingale pricing approach, and Hull is good to fill in the gaps of the ST6 acted/core reading (e.g. I found that the core reading didnt explain "rolling the hedge forward" very well in my opinion - it sort of jumped in mid-way through the Hull notes. Acted didn't add anything useful to this topic, so I had to read Hull to get a proper explanation. It seems that the core reading is just sections of Hull with a slight rewording, hence I am sure that Hull is the key to this exam. I haven't yet gone through the Hull questions, but I am going to do that soon (once I have finished past papers). Q3, S03 - this is so blantently short puts. It is inexcusable that the many examiners and checking people missed this. To miss it simply means they did not try doing the exam, or they didn't know the subject themselves. It's no wonder the quants have such a poor opinion of actuaries...
