What is a common implicit assumption that is made when computing VaR using parametric methods?

The expected returns are constant, but the standard deviation changes over time.
The standard deviations of returns are constant, but the mean changes over time.
The mean of and the standard deviations of returns are both constant.
The mean and standard deviation of returns change periodically in response to crises.

Answer(s): C

Which one of the following statements is an advantage of using implied volatility as an input when calculating VaR?

Implied volatility assumes volatilities are constant which makes it easy to implement in models.
Current market data is used to determine implied volatilities, which makes them forward looking measures
Implied volatilities are better at predicting actual volatilities
Loss probabilities from the standard normal distribution are used to compute implied volatilities, which makes it easy to compute the.

Answer(s): B

What does correlation between two variables measure?

Symmetry of a joint distribution of the two variables.
Association between the two variables and the strength of a possible statistical relationship.
The proportion of variability in one of the variables that is explained by the other.
Extreme returns of both variables.

Answer(s): B

For two variables, which of the following is equal to the average product of the deviations from their respective means?

Answer(s): D

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