8002 PRM Certification - Exam II: Mathematical Foundations of Risk Measurement Questions and Answers

A typical leptokurtotic distribution can be described as a distribution that is relative to a normal distribution

Let X be a random variable normally distributed with zero mean and let . Then the correlation between X and Y is:

The first derivative of a function f(x) is zero at some point, the second derivative is also zero at this point. This means that:

A simple linear regression is based on 100 data points. The total sum of squares is 1.5 and the correlation between the dependent and explanatory variables is 0.5. What is the explained sum of squares?

You invest $100 000 for 3 years at a continuously compounded rate of 3%. At the end of 3 years, you redeem the investment. Taxes of 22% are applied at the time of redemption. What is your approximate after-tax profit from the investment, rounded to $10?

I have a portfolio of two stocks. The weights are 60% and 40% respectively, the volatilities are both 20%, while the correlation of returns is 100%. The volatility of my portfolio is

Bond convexity is closely related to …

If A and B are two events with P(A) = 1/4, P(B) = 1/3 and P(A intersection B) =1/5, what is P(Bc | Ac) i.e. the probability of the complement of B when the complement of A is given?

For the function f(x) =3x-x3 which of the following is true?

Over four consecutive years fund X returns 1%, 5%, -3%, 8%. What is the average growth rate of fund X over this period?

Let a, b and c be real numbers. Which of the following statements is true?

On average, one trade fails every 10 days. What is the probability that no trade will fail tomorrow?

Find the first-order Taylor approximation p(x) for the function: at the point .

In a 2-step binomial tree, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of d = 1/u. The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. Use the Cox, Ross, Rubinstein parameterization to find the risk neutral probability and hence find the value of a European put option with strike 102, given that the underlying price is currently 100.

Consider the linear regression model for the returns of stock A and the returns of stock B. Stock A is 50% more volatile than stock B. Which of the following statements is TRUE?

Which of the following is consistent with the definition of a Type I error?