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
Incorrect

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 worstcase scenarios

Market risk

Liquidity risk

Operational risk

Regulatory risk
Correct
Incorrect

Question 3 of 5
3. Question
Match each of the following modelling approaches to the most appropriate description
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 Using each randomlyselected historical month of observations as a datapoint in a forwardlooking simulation
 Evaluating a small number of situations using different prespecified assumptions
 Using a linear combination of economic variables to describe the returns on an asset class
 Using mathematicallyderived relationships between asset classes to describe their future returns

Bootstrapping

Scenario analysis

Factor modelling

Databased 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 intertemporal links are lost.
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Question 5 of 5
5. Question
Which one of the following is not a desirable characteristic of pseudorandom numbers?
Correct
Pseudorandom numbers should be replicable
Incorrect