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Search results for 'risk'

May 15, 2017

A ____ significance level implies a ____ confidence interval implies a ____ absolute value at risk.

A lower significance level ⇒ greater confidence interval ⇒ higher absolute VAR For VAR we only care about the lower tail of the distribution. 5% VAR ⇒ 90% Confidence Interval ⇒ 1.65 standard deviations below expected return 2.5% VAR ⇒ 95% Confidence Interval ⇒ 1.96 standard deviations below expected return .5% VAR ⇒ 99% Confidence Interval ⇒ 2.58 standard deviations below expected return […]

May 1, 2017

In macroeconomic factor models active factor risk is caused by:

deviations of a portfolio’s factor sensitivities from the benchmark factor sensitivities.

April 5, 2017

Who is exposed to credit risk in a payer swaption at initiation?

The long position is exposed to potential credit risk in a  payer swaption at initiation, but the short position in a payer swaption is not.

April 1, 2017

Risk Budgeting

Risk budgeting occurs when the firm chooses a desired maximum risk and then budgets this out to individual portfolios. The risk will generally be based on ex ante tracking error or VaR.

April 1, 2017

Value At Risk (summation)

A VAR statistic had 3 components: a time period a confidence interval a loss amount (or loss percentage) There are 3 ways to calculate it: Historical Method using a histogram Variance-Covariance Method assumes normal distribution Monte Carlo Simulation Worst case is worse than VAR confidence interval predicts.

January 8, 2017

Does CAPM incorporate company specific risk?

No

November 27, 2016

In the structural model of credit risk, holding the equity is economically equivalent to a ____ on the company’s assets.

European Call

April 30, 2016

Systematic risk is high for…

…high beta funds.

February 28, 2016

Tranche A has more ____ risk and tranche Z has more _____ risk.

Contraction Extension

January 22, 2016

Like CAPM the Arbitrage Pricing Model assumes unsystematic risk is not priced?

TRUE It can be diversified away.