FRM-VAR

anbu.edu
Finance Junkie
Posts: 205
Joined: Mon Feb 04, 2013 3:35 pm

FRM-VAR

Postby anbu.edu » Sat Apr 27, 2013 10:29 pm

Which of the following statements regarding the structured Monte Carlo approach is CORRECT?

The general equation assumes the underlying asset has normally distributed returns with a mean of μ and a standard deviation of σ.
The structured Monte Carlo (SMC) approach can address multiple assets with multiple risk exposures by generating correlated scenarios based on a statistical distribution.
In some cases where it does not produce an accurate forecast of future volatility, increasing the number of simulations can improve the forecast.
A) I and II.
B) I and III.
C) II and III.
D) I, II and III.

Source schweser
I know that opt 2 is correct but opt 1 is wrong -Ans is (A)
Can you please correct me if i am wrong

vnraghuveer
Good Student
Posts: 20
Joined: Mon Apr 08, 2013 1:36 pm

FRM-VAR

Postby vnraghuveer » Fri May 10, 2013 11:49 am

Hi anbu

Option 1 is also right because the simulated value in a monte carlo simulation does assume normal distribution with a mean μ and a standard deviation of σ


Return to “FRM Part I”



cron

Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.