I recently added the “meet the verbs” video series that you may have seen in the LP and LFV online seminars to the LRM online seminar as well at someone’s request. Even though these videos were created with the 5-hour exams in mind (and also for people who are brand new to FSA exams), there are definitely useful tips that apply to the LRM exam as well.
You can find these videos in the Introduction section of the online seminar.
We understandably get a lot of questions about how to calculate discrete VaR since different LRM readings define it differently. Our stance on how to approach discrete VaR has been evolving as we’ve seen more examples of how the LRM exam committee has been grading questions involving VaR.
Right now, the most practical advice I can give is to throw out any academic interpretations of VaR you may see on or off syllabus and go with the “5th worst” approach. This means that if you have 100 results sorted best to worst, the 95% VaR = 96th result. This is technically the 96th percentile and not the 95th percentile, but it is consistent with recent LRM graders’ opinions on how you should calculate discrete VaR.
Going with the first result “inside” the tail area is also conservative. It means you have enough capital to avoid ruin > 95% of the time rather than >= 95% of the time, so to speak.
You can obviously generalize this beyond 100 scenarios, but this is the most practical way I can think of to describe it right now, and I think it will work on the exam with 99.9% confidence (OK, that’s a bad joke).
Related to this, CTE would be the average of the 5% worst results (average of scenarios 96–100 in the example above). Other names for CTE include TailVaR, expected shortfall, CVaR, etc.
The SOA recently announced future changes to fellowship exams. For people on the ILA track, the changes do not appear to be of major concern with respect to the timing of when you take exams between now and then. The earliest impact to the written exams is fall 2019, so the next 3 sittings are unaffected (4 in the case of LFV).
In summary:
Topic coverage will be restructured among the three ILA exams and exam names changed. Candidates with credit for any of the current exams will be given transition credit for the corresponding revised exam.