FRM Quant Analysis
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What value of kurtosis gives fat tails, and what is this called?
Over 3 and its called leptokurtic
What value of kurtosis gives thin tails and what is it called?
Under 3 and its called platykurtic
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
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
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
A normal distribution has a skewness of 1. True or false?
False. A normal distribution has a skewness of 0.
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
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