FRM Quant Analysis

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1. What value of kurtosis gives fat tails, and what is this called?
Over 3 and its called leptokurtic
2. What value of kurtosis gives thin tails and what is it called?
Under 3 and its called platykurtic
3. How are expected values summed?

i.e. E(X + Y) = ?
E(X + Y) = E(X) + E(Y)

The expectation of a sum is the sum of expectations
4. How are the variances of 2 variables summed?

i.e. var(X + Y) = ?
var(X + Y) = var(X) + var(Y) + 2 cov(X,Y)

The variance of a sum is the sum of the variances ONLY if the variables are uncorrelated, i.e. cov(X, Y) = 0
5. What does negative skewness mean?
Negative skewness means that the distribution has a long left tail, i .e. a high probability of getting negative values
6. A normal distribution has a skewness of 1. True or false?
False. A normal distribution has a skewness of 0.
7. What is the standard deviation for the sample average (if draws are independent)?
The standard deviation is given by the population volatility divided by the square root of number of observations

Card Set Information

 Author: stevel56 ID: 109340 Filename: FRM Quant Analysis Updated: 2011-10-16 18:53:13 Tags: FRM Folders: Description: FRM part 1 - Quantitative Analysis Show Answers:

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