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
Quantitative Analysis of Financial Data
These questions cover the analysis of data, and the selection and use of copulas
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Question 1 of 5
1. Question
Which of the following statistical distributions might be suitable for modelling the returns on a portfolio of assets?
Correct
The lognormal, gamma and pareto distributions are all lefbounded at zero, so are unsuitable for modelling returns (which can usually be both positive and negative)
Incorrect

Question 2 of 5
2. Question
State which of the following is (or are) true in relation to stochastic simulations using principal component analysis (PCA)
Correct
The first principal component is the one with the largest eigenvalue; each eigenvalue represents the variance of that principal component
Incorrect

Question 3 of 5
3. Question
Which one of the following correctly describes the process for evaluating an Archimedean copula?
Correct
Incorrect

Question 4 of 5
4. Question
If two asset classes are linked by a Clayton copula with a parameter (a) of 6, what is the correlation between these asset classes as measure by Kendall’s tau?
Correct
Kendall’s tau is given by a/(a+2), so 6/(6+2)=0.75
Incorrect

Question 5 of 5
5. Question
Match each of the following equations to the correct description
Sort elements
 Autoregressive process
 Moving average process
 Integrated process
 Trend stationary process
 White noise process

X(t)=a(0)+a(1)X(t1)+a(2)X(t2)+e(t)

X(t)=e(t)+b(1)e(t1)+b(2)e(t2)

X(t)X(t1)=a(0)+e(t)

X(t)=a(0)+a(1)t+e(t)

X(t)=e(t)
Correct
Incorrect