Calcs using normal distribution tables – Exam 1

[Anonymous]

Hi everyone

In the handbook there are a few calculations that require you to check normal distributions tables such as for calculating VaR in the Portfolio Mathematics chapter or valuing options where you need the cumulative normal distribution values. Does anyone know how this would work in the exam? Would they display a table on screen or assume that you know some key values by heart? Or would they not ask questions that involved checking normal dist tables?

Your help would be much appreciated!

Thanks
EMC

[Mike]

Assuming I understand what you are referring to, you need to know the P95, P99, P80 percentiles of the normal distribution

[Anonymous]

Hi MSaxp

Thanks for your response but not sure this will be sufficient for the questions I referred to.

For example in the BSM option pricing formula you have N(d1) and N(d2) which are cumulative normal distribution values and d1 is a lengthy formula that might come up as any number eg something like 0.358 and you need to know the cumulative normal distribution related to that number. No way of learning all values for this so wondering whether a table will be provided or whether these questions will not be asked.

Thanks
EMC

[Anonymous]

I guess (hope) they will not be asked !

[Mike]

The exam is reasonable and doesnt expect you to remember random numbers, so the number will either be provided or a table to look it up will be. Neither should worry you, i think.

To be honest, nobody can say with certainty, as most people will only have seen 1 real test. That makes it difficult to generalise anything you saw in that test.

[Anonymous]

I would say in all three exams you should know the 95%, 97.5% and 99% confidence intervals.

Remember that 2 tailed and 1 tailed Z values are different.

[Author]

Posts