Which one of the four following statements about back testing the VaR models is correct?Back testing requires
Answer(s): B
On January 1, 2010 the TED (treasury-euro dollar) spread was 0.9%, and on January 31, 2010 the TED spread is 0.4%. As a risk manager, how would you interpret this change?
Answer(s): A
Which one of the following four physical commodities markets has the right combination of characteristics that generally allows short selling in the market, without making the short-selling transaction prohibitively expensive?
Answer(s): D
Which of the following statements about the option gamma is correct? Gamma is theI) Second derivative of the option value with respect to the volatility.II) Percentage change in option value per percentage change in the price of the underlying instrument.III) Second derivative of the value function with respect to the price of the underlying instrument.IV) Rate of change of the option delta with respect to changes in the underlying price.
Answer(s): C
In analyzing the historical performance of a financial product, you are concerned about "fat tails", the probability of extreme returns compared to realized returns.Which of the following measures should you use to determine if the product return distribution of the product has "fat tails"?
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