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Examinable. You have to read them. They are part of the syllabus. But if you want to take the risk, you can ignore them at the risk of guessing about 4 questions in the exam. Cheers
Here is the answer to your question regarding- Realised volatility less than using the time rule:
1) Time rule assumes that volatility on different days are independent i.e. the change in stock price from yesterday does not affect the change in stock price today.
2) Time rule assumes identical distribution i.e. the mean and variance of the stock price remains the same on all days.
If the independent rule is violated (and it is always violated e.g. if there is a sharp rise in stock price yesterday, there might be another sharp rise today as investors try to cash in), then the realised volatility changes.
Now with negative correlation – this means that two days have a relationship where rise in volatility in one is more or less followed by fall in volatility in another i.e. The combined variance (and hence volatility) of the two will be less than the an constant volatility assumed under the Time rule (see assumption 2 above). Now I have explained it in the most basic terms and I hope it helps. Using the formula for combined variance i.e. (V1^2 + V2^2 +- 2COV12) should provide analytical insight. When the two are negatively correlated, the minus sign is used and the lowers the overall variance and hence the overall volatility. I hope this helps. Cheers.
Ignore the ePRM. Just follow the syllabus. Make the exam guide your ultimate guide. Otherwise you will waste time reading stuffs that don’t matter.
Cheers
Exam 1 was okay. I read for about 2 months but not dilligently. But had a pretty high score (86%) in exam 1. The key is to understand the content. I did not understand the content 100% though. Most of the questions revolved around understanding the contents. Saw 1 or two similar questions here which helped too. Hence why I am back.
Exam 2 was okay. I prepared for it in like 8 days because I have good maths background and just barely passed!! Problem is I forgot some of the formulas in the exam and was struggling.
That is my experience. I would say read the manual twice (the manual is very hard to read though, I must confess. The authors wrote it like they are talking to their friends in an office!! Too much irrelevant material). But read the manual twice. Go through the questions here once or twice. And you will definitely pass. All the best.
