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Financial Risk Modelling Week Ten
Financial Risk Modelling Week Ten
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Questions
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Answers
1
Data sets with high kurtosis tend to have…
Outliers
All the above
Values greater than 3
Heavy tails
2
Statistical functions that describe the likelihood of obtaining values of a random variable are referred to as?
Mathematical models
Risk models
Probability distributions
Statistical models
3
A risk analyst is accessing the risk of default for a corporate lending application. Where would they look?
All of the above.
Financial statements.
Disclosure data
Personal data
4
The analysis that finds the combinations of input values responsible for changes in outputs are referred to as?
Scenario analysis
Regression analysis.
Sensitivity analysis
Correlation analysis
5
Probability distributions can be used for the following.
Evaluate the likelihood of different results
To know the outcomes most likely to occur
All of the above
Understand the spread of potential values
6
How do leaders manage level four uncertainty?
All of the above.
Use a set of assumptions
Looking at actual data
Look at the performance of a similar market.
7
Events that can lead to undesired consequences are referred to as?
Unanticipated events
Risk events
Adverse events.
All of the above
8
Those events that are impossible to predict are referred to as?
Uncertain events.
One-off events
None of the above
Probabilistic events
9
Which of the ratios can assist in assessing the repayment ability of a loan applicant?
Leverage analysis
Profitability analysis
All of the above.
Liquidity analysis
10
The two core components of risk are?
Probability and statistics
Regression and Correlation
All of the above
Severity and Likelihood
11
The average error in a valid model is-
Five
TWO
One
Zero
12
The first moment in a probability distribution can be used to measure-
The shape of the distribution
None of the above.
The scale of the distribution
The location of the distribution
13
The analysis that helps us to identify the uncertain inputs with the biggest impact on our key outcomes is known as
Deterministic analysis,
Probability analysis
Correlation analysis
Sensitivity analysis
14
The data values in a valid model must scatter
All the above.
Monotonically above and below the trend line
Randomly above and below the trend line.
Systematically above and below the trend line
15
The third moment in a probability distribution can be used to measure--
None of the above.
The location of the distribution.
The shape of the distribution.
The scale of the distribution.
16
A business is seeking to invest in the U.S market what level of business uncertainty would this fall into.
Level Three
Level One
Level Two
All of the above.
17
A random variable with only a finite number of possible values is referred to as?
Continuous variable
Panel variable
Time series.
Discrete variable
18
A sequence of data points ordered in time order is referred to as?
Time indices
Panel data
Time series.
Cross-sectional data.
19
The recent changes to the Basel accord regulation falls under what level of business uncertainty?
All of the above.
Level One.
Level Two
Level Three
20
What are the set of arguments for a normal probability distribution?
Mean and Standard Deviation.
Mean and Mode
Skewness and Kurtosis
Standard Deviation and Variance
21
A mathematical model that is used for causal analysis is referred to as?
Regression model
Correlation model
Analytical model
All of the above.
22
The analysis that evaluates the strength of the linear relationships between two or more variables is referred to as
Correlation analysis
Deterministic analysis
Probability analysis
Sensitivity analysis
23
The second moment in a probability distribution can be used to measure--
None of the above.
The scale of the distribution.
The shape of the distribution
The location of the distribution.
24
Random variables that have an infinite number of values between any two values are referred to as?
a) Time series.
Discrete variable.
Continuous variable.
Panel variable.
25
What type of model does not follow the trend of the past?
Valid model
Correlation model
Mathematical model.
Invalid model.
26
Risk management deals with the issue of uncertainty only?
True
False
27
The range of values below and above the sample statistic in a confidence interval is known as
a) Standard error
Confidence level
The margin of Error.
Sampling error
28
The following except one is not a source of level three uncertainty.
Customer demand for new products
Volatile economic conditions.
Opening a new franchise in the U.S.
New Basel three accord.
29
A risk assessment method that allows us to see possible outcomes of a future decision is known as
Monte Carlo simulation.
Net Present Value
Mathematical methods
Discounted Cash Flow Model
30
The following except one is not a danger of using deterministic models in risk analysis?
Ignore underlying uncertainties
They force analysts to view uncertainty in a binary way
They make analysts underestimate the risk
Account for uncertainties via probability distributions.
