PRM Certification - Exam II: Mathematical Foundations of Risk Measurement
Last Update May 18, 2024
Total Questions : 132
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Let f(x) = c for x in [0,4] and 0 for other values of x.
What is the value of the constant c that makes f(x) a probability density function; and what if f(x) = cx for x in [0,4]?
You want to test the hypothesis that a population parameter β of a regression model is zero. Your alternative hypothesis is that β≠0. Denote by SD(β) the estimated standard deviation of β, and by MEAN(β) the estimated mean of β. Which test statistic is appropriate, and what is its distribution?
Which of the following statements about skewness of an empirical probability distribution are correct?
1. When sampling returns from a time series of asset prices, discretely compounded returns exhibit higher skewness than continuously compounded returns
2. When the mean is significantly less than the median, this is an indication of negative skewness
3. Skewness is a sign of asymmetry in the dispersion of the data
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 50%. The volatility of my portfolio is
On average, one trade fails every 10 days. What is the probability that no trade will fail tomorrow?
What is the maximum value of the function F(x, y)=x2+y2 in the domain defined by inequalities x ≤ 1, y ≥ -2, y-x ≤ 3 ?
Suppose 60% of capital is invested in asset 1, with volatility 40% and the rest is invested in asset 2, with volatility 30%. If the two asset returns have a correlation of -0.5, what is the volatility of the portfolio?
A biased coin has a probability of getting heads equal to 0.3. If the coin is tossed 4 times, what is the probability of getting heads at least two times?
Which of the following can induce a 'multicollinearity' problem in a regression model?
You are to perform a simple linear regression using the dependent variable Y and the independent variable X (Y = a + bX). Suppose that cov(X,Y)=10, var(X)= 5, and that the mean of X is 1 and the mean of Y is 2. What are the values for the regression parameters a and b?
What is the probability of tossing a coin and getting exactly 2 heads out of 5 throws?
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?
An option has value 10 when the underlying price is 99 and value 9.5 when the underlying price is 101. Approximate the value of the option delta using a first order central finite difference.
A 95% confidence interval for a parameter estimate can be interpreted as follows:
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.