September 2008

[El Gringo]

so it's over...

their timing was spot on, given what has been happening last week.

How did the few who took that paper found it?

Q1 - FED cutting rates...

I thought that 14 marks was a lot...talked about every single thing i could think of...from global economic recession to politics from the White House...

the rest...some bookwork plus application to the UK economy. Interesting if you remember the events after Bear Stearn collapsed and rescue by JPM with Fed help. and some 101 economics i think.

Credit rating thing...i remember the two approaches but given not in great details...

all in all if i score 15- 20 out of this one, i'd be chuffed!

Q2 - Basel and the MBS Sector.

Like the fact that i was broken down, made it much much easier to answer.

Think that I scored decently on parts of this one, though made up some stuff about the second way to reduce run time...i remember only one way to do it.

The rest was pretty much bookwork. so if you had read the notes and done your homework properly i think that you should be ok.

Conclusion - better that Q1, but doubtful if i'll be able to score the remaining 20 -25 marks to get over the pass mark of 40.

But very interesting exam and subject. the fact that it was topical made it even more so.

even if I do fail SA5 (which, as time goes by, seems more and more likely!), i'd definitely recommend it to anybody.

Your thoughts?

PS: Colin, they did ask a question about the OAS. Your odds of 1 in a million did pay off! wished I had put in a bet!

 

[El Gringo]

I know that there's only a few of us who took the paper...but any comments?

 

[Colin McKee]

Sounds like another interesting SA5 exam

so it's over...

their timing was spot on, given what has been happening last week.

How did the few who took that paper found it?

Q1 - FED cutting rates...

I thought that 14 marks was a lot...talked about every single thing i could think of...from global economic recession to politics from the White House...

the rest...some bookwork plus application to the UK economy. Interesting if you remember the events after Bear Stearn collapsed and rescue by JPM with Fed help. and some 101 economics i think.

Credit rating thing...i remember the two approaches but given not in great details...

all in all if i score 15- 20 out of this one, i'd be chuffed!

Q2 - Basel and the MBS Sector.

Like the fact that i was broken down, made it much much easier to answer.

Think that I scored decently on parts of this one, though made up some stuff about the second way to reduce run time...i remember only one way to do it.

The rest was pretty much bookwork. so if you had read the notes and done your homework properly i think that you should be ok.

Conclusion - better that Q1, but doubtful if i'll be able to score the remaining 20 -25 marks to get over the pass mark of 40.

But very interesting exam and subject. the fact that it was topical made it even more so.

even if I do fail SA5 (which, as time goes by, seems more and more likely!), i'd definitely recommend it to anybody.

Your thoughts?

PS: Colin, they did ask a question about the OAS. Your odds of 1 in a million did pay off! wished I had put in a bet!

Colin: Hmm. I wasnt there, but from the sounds of things it was a topical issues sort of exam. I hope the questions on OAS and credit rating (was it reduced form and structural approaches?) were bookwork rather than a calculation questions since I didnt really cover much in the tutorial. On the bright side I did highlight the fact that all the regulation / central bank / economy stuff and the effect of interest rates was big news. Ahh well, cant get them all right but it sounds like you gave yourself a good chance of passing. Cheers.

 

[El Gringo]

Hi Colin

Well fingers crossed that i'll do ok to pass - Don't want to end up remembering that weird list of mnemonics that you handed out! I was having a look at it on the Tube before the exam, and people thought that I was a weirdo! Though to be fair, I think that I'll actually never forget some of them...

The credit ratings question's answer I think asked for a description/explanation of the two approaches. I did pay much attention to that but hopefully my explanation made some sense!

The OAS one was to define what it means, and how it is calculated...and they previously asked us how to value an MBS...so we can see where they were coming from...ie use the Monte Carlo sims to work out the OAS (Am I right?).

Anyway, good luck to everybody, Hopefully they'll pass a few more of us this time round.

 

[El Gringo]

Sa5?

Hi Colin,

got my results for SA5, and I failed it. Disappointed for sure (given the hours I've put in, and the amount I wrote in the exams - 2.5 booklets, trying to explain things properly).

I have got a couple of questions for you:

- Having seen the paper, and marked them before, how many marks do you think was needed to pass this exam?

- Does any non core reading material get consider at all (even if it is right)?

I have been thinking where I went wrong, and my guess is that I must have written too much, especially on the 2nd question about MBS.

I have done some extensive reading on this subject, and through another exam, develpoed a greater in-depth knowledge of the area. I used some of this material in my answers (example:briefly mentioning about the various structures of CMOs such as sequential, PSA structures, etc) which, although do not feature in the Core Reading for SA5, exist in the real world and are one of the current causes of the demise of the financial world. My belief is that the marker didn't have clue what I was talking about, and so marks have not been awarded for the points made.

My question is: Given that this is supposed to be an application subject, why is there this inherent need to stick to lists, and definitions??? Is this done purposely as a means of hiding a lack of understanding of how the REAL financial world works??? This is the impression that I have,ie a lack of in-depth knowledged and understanding being masked by rote learning.

I think that the exam format and syllabus are too vague to be honest, and range from risk management to creation of cash management accounts for companies...There seems to be a lack of focus, lack of a proper definition of the aims of the syllabus (seems to me that it has been put together over a pint in some pub!)

Please do not misinterprete my comments for a lack of respect for actuaries who are trying to make it into finance...It is rather the attitude of the IoA towards setting exams that annoys me. Granted that this is a relatively new exam, and resources are scarce. But then why offer something that is of inferior quality to students? Given the excessive sums being charged, I think that the quality could have been better...This can, besides, be felt in the model solutions provided on the IoA's website - some of them are really mediocre to say the least.

The IoA wants actuaries to break the boundaries of the pension and insurance world and explore new avenues. The point is that equipped with the tools that they have provided us with, progress will be really hard, or simply impossible.Why? Because a "finance" actuary will not be able to make it in an interview? Those who have made it have actually gone through other courses...such as Msc Finance...

OK I do admit that there is a bit of fustration in all of what I said, but when compared to the CFA examinations, for example, well...we cannot even compare! Some jobs now have the requirement that the candidate must be CFA qualified...What is the IoA doing about this??? Nothing as far as I've heard or seen...

Someone once told me that the word a "finance" actuary was an oxymoron...I'm starting to believe him!

 

[Colin McKee]

concerns

Sorry to hear that you failed. It is very frustrating, especially when you have worked hard, and done plenty of reading outside the course. I am sure you did know your stuff, and that your material on MBSs was relevant. Your question was whether students can get a lot of marks for this higher order knowledge. the answer is that you can if the examiner asks for it. For example in Q1, parts (i) and (ii), marks would have been awarded for good current knowledge of what was being discussed at the time in the press and good analysis of the pros and cons. (Although I struggled a bit when I read that one of the possible BofE responses was "no response"). Most of the parts in Q2 were short (2 to 6 marks) and were looking for a specific piece of core reading. In such questions there may be limited scope to give markers freedom. It is important that all students are marked relatively consistently, and this is more easily done with a more strict marking schedule. Usually (although I didnt mark any of this) some freedom is however granted. But the Institute itself would be the best place to direct specific questions.

The bottom line is that, if there is core reading on the subject, get it down first. Then add further knowledge.

In terms of the CFA - I think it is also relatively strictly marked, and many questions are multichoice. I know that it is being hit hard by the credit crunch at the moment, and numbers sitting this exam are likely to have dropped hugely. The actuarial qualification should stay relatively stable (fingers crossed).

In terms of how many marks are required to pass, we (Acted) are not given this data. It varies from exam to exam depending on how difficult the examiners thought the paper was. I cant really help you here, but the Institute staff actuary may be able to provide an estimate.

Anyway - I am sure this doesnt make you feel better. It would be great to hear from other students who struggled in this exam, or who struggled in earlier exams and found a formula that helped them in this one??

All the best in the next exam, which I am sure you will pass!

Colin