I continue to miss questions because they are poorly worded. For example:
“Second, we market to market our credit derivatives in order to post collateral whenever a credit derivatives value is positive to Baltic and negative to the counterparty”.
Is this correct?
My Answer: Yes
CFAI: No, the Counterparty will post collateral, not Baltic.
It never states who was actually posting the collateral, only that has been posted. How should we know who posted it??
Curious if they do this just to make you miss questions on the Mock exam.
We Mark to market and post collateral ( margin )when credit derivatives are positive to Baltic. So we post collateral When credit derivatives are positive. Is that true ? Of course no.
It’s oddly worded, but that’s the CFAI for you.They’re not just testing your topic knowledge, they are seeing if you are awake and can circle the correct answers.
I have a feeling the mock exams are a sample of the item sets that don’t make it into the real exam. Once they go into the “trash” file I don’t the the CFAI bothers to clean them up any further.
It’s also rather pathetic on the CFAI’s part that they can’t create at least one brand new mock per year.
Glue, you wrote it how it should be written: we market to market AND post collateral.
The way the wrote it could be interpreted as: we mark to market and collateral is posted (presumably by counter party).
“In order to post collateral” is correct if interpreted as mark to market so the counterparty will post. It is never delineated who posts in the original question.
i have run into this multiple times. How you interprete the question, even if you 100% understand the concept, dictates if you get it right.
I read, and missed, this question for the exact reason you did.
Whoever owes money will post collaterol was my interruptation. If you read it carefully they’re saying the position is positive to Baltic so they have no need to post.
There’s asking difficult questions and there’s asking questions difficultly. That’s CFAI for ya!