Education
- Overview
- 01 Introduction to ERM
- 02 External risk frameworks
- 03 The ERM process
- 04 Risk classification
- 05 Risk measurement
- 06 Introduction to risk modelling
- 07 Quantitative analysis of financial data
- 08 Further risk modelling
- 09 Analysis of different types of risk
- 10 Risk optimisation and responses to risk
- 11 Risk Mitigation
- 12 Capital Management
Introduction to Risk Modelling
These questions cover the quantification of risk, measures of correlation and modelling approaches
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Question 1 of 5
1. Question
Which one of the following statements about correlation is correct?
Correct
Pearson’s rho is a valid only if the marginal distributions are jointly elliptical; Spearman’s rho and Pearson’s rho are equal if the underlying data are uniformly distributed; Spearman’s rho is a rank
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Question 2 of 5
2. Question
Match the following risks to the descriptions of approaches used
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- Typically assessed using stochastic models
- Can be assessed stochastically or through scenario analysis
- Not assessed quantitatively historically, but quanitative models increasingly required by regulators
- Best assessed using worst-case scenarios
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Market risk
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Liquidity risk
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Operational risk
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Regulatory risk
Correct
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Question 3 of 5
3. Question
Match each of the following modelling approaches to the most appropriate description
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- Using each randomly-selected historical month of observations as a datapoint in a forward-looking simulation
- Evaluating a small number of situations using different pre-specified assumptions
- Using a linear combination of economic variables to describe the returns on an asset class
- Using mathematically-derived relationships between asset classes to describe their future returns
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Bootstrapping
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Scenario analysis
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Factor modelling
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Data-based modelling
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Question 4 of 5
4. Question
Which one of the following does not describe a feature of bootstrapping?
Correct
Because data are selected randomly, any inter-temporal links are lost.
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Question 5 of 5
5. Question
Which one of the following is not a desirable characteristic of pseudo-random numbers?
Correct
Pseudo-random numbers should be replicable
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