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Week 6 Quiz QUESTION 1 If the volatility for a portfolio is 20% per year, what is the volatility per quarter? a
Week 6 Quiz
QUESTION 1
- If the volatility for a portfolio is 20% per year, what is the volatility per quarter?
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a. |
20% |
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b. |
10% |
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c. |
5% |
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d. |
2% |
10 points
QUESTION 2
- Which of the following is true of a positive semi-definite variance-covariance matrix?
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a. |
All elements of the matrix are positive. |
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b. |
The determinant of the matrix is positive. |
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c. |
The matrix has ones on the diagonal. |
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d. |
The matrix is internally consistent. |
10 points
QUESTION 3
- Which of the following is true?
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a. |
Expected shortfall is always less than VaR. |
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b. |
Expected shortfall is always greater than VaR. |
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c. |
Expected shortfall is sometimes greater than VaR and sometimes less than VaR. |
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d. |
Expected shortfall is a measure of liquidity risk whereas VaR is a measure of market risk. |
10 points
QUESTION 4
- The parameters in a GARCH (1,1) model are: omega = 0.000002, alpha = 0.04, and beta = 0.95. The current estimate of the volatility level is 1% per day. What is the expected volatility in 20 days?
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a. |
1.09% |
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b. |
1.10% |
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c. |
1.11% |
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d. |
1.12% |
10 points
QUESTION 5
- In the case of interest rate movements, the most important factor corresponds to
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a. |
A parallel shift |
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b. |
A slope change |
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c. |
A bowing |
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d. |
An increase in short rates |
10 points
QUESTION 6
- Which of the following is true?
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a. |
EWMA is a particular case of GARCH (1,1) where the reversion rate is zero. |
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b. |
EWMA has a lower reversion rate than GARCH (1,1), but it is not zero. |
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c. |
EWMA has a higher reversion rate than GARCH (1,1). |
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d. |
Sometimes EWMA has a higher reversion rate than GARCH (1,1) and sometimes it has a lower reversion rate than GARCH (1,1). |
10 points
QUESTION 7
- Which was the minimum capital requirement for market risk in the 1996 BIS Amendment?
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a. |
At least 3 times the 10-day VaR with a 99% confidence level |
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b. |
At least 3 times 7-day VaR with a 97% confidence level |
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c. |
At least 2 times 5-day VaR with a 95% confidence level |
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d. |
1-day VaR with a 99% confidence level |
10 points
QUESTION 8
- Which of the following is true?
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a. |
All option implied volatilities tend to move by the same amount from one day to the next. |
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b. |
The implied volatilities of long-dated options tend to move by more than the implied volatilities of short-dated options. |
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c. |
The implied volatilities of short-dated options tend to move by more than the implied volatilities of long-dated options. |
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d. |
Sometimes B is true and sometimes C is true. |
10 points
QUESTION 9
- How many parameters are necessary to define a GARCH (1,1) model?
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a. |
1 |
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b. |
2 |
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c. |
3 |
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d. |
4 |
10 points
QUESTION 10
- Which of the following is true when the parameter lambda equals 0.95?
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a. |
The weight given to the most recent observation is 0.95. |
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b. |
The weight given to the observation one day ago is 95% of the weight given to the observation two days ago. |
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c. |
The weights given to observations add up to 0.95. |
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d. |
The weights given to the observation two days ago is 95% of the weight given to the observation one day ago. |
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