ST6 FAQ (Last updated 26 November 2010)

This thread contains the Subject ST6 questions asked most frequently by students, with answers written by ActEd's tutors. Each year, we'll incorporate these questions and solutions into the study material.

This thread was last updated on 26 November 2010.

Question

Do I need to have done any of the other ST subjects before doing ST6?

Answer

The only subject you really need to have studied is CT8 (or 109). And in fact, some students have studied CT8 and ST6 together, without problems.

Some of the material on interest rate derivatives overlaps with ST5, but you do not need to do ST5 in order to study ST6.


Question

How "mathematical" are the exam questions in this subject?

Answer

The papers we have seen so far have had roughly a 50/50 split between "mathematical" and "wordy" parts.


Question

Can I use questions from the old Certificate in Derivatives course in my revision?

Answer

The syllabus for ST6 is very similar to the old Certificate in Derivatives (CiD) course. So we have incorporated most of the questions from the CiD exam papers within the ActEd course. In most cases these appear at the end of the corresponding part of the Question & Answer Bank. We have had to modify a number of these questions so that they fit in with the ST6 syllabus and the Core Reading.

However, we have not used any of the questions from the first (1999) or the last (2004) CiD papers. So you could look at these. But do remember that the syllabus and reading may be slightly different.

The syllabus for the Advanced Certificate in Derivatives (ACiD) course is much more detailed and has a more practical slant. We have indicated in the course materials where we think parts of these questions may be helpful in your preparation for the ST6 exam.


Question

There are a lot of complicated formulae for the various interest rate models ? CIR etc. These aren't in the Tables, so do I need to learn them?

Answer

We don't think it would be reasonable to memorise all these formulae. (The ActEd tutors don't know them by heart either!)

However, it is important that you know the key formulae, such as the stochastic differential equations defining each model, and the general formula for valuing a bond or an interest rate derivative using the risk-neutral measure.

In past 109 papers (where interest rate models were examined previously) and in the CT8 and ST6 papers, any detailed equations that you needed were given in the question.


Question

Where do I get the solutions to the questions at the end of the chapters in Hull?

Answer

The answers to the Questions and Problems at the end of the chapters are available in a separate booklet called the Student Solutions Manual, which you can buy in a bookshop or through an online bookseller. The solutions to the Assignment Questions are not publicly available and ActEd don't have access to these either.