#1
What is the Capital Asset Pricing Model (CAPM) used for?
Valuing real estate properties
Estimating the cost of equity capital
Forecasting commodity prices
Calculating bond yields
#2
Which of the following is NOT a type of risk commonly considered in risk modeling?
Market risk
Credit risk
Management risk
Operational risk
#3
Which financial instrument is used to transfer insurance risk from one party to another?
Derivative
Swap
Option
Reinsurance
#4
Which type of risk is associated with the potential loss due to inadequate or failed internal processes, people, and systems?
Market risk
Credit risk
Operational risk
Liquidity risk
#5
What does 'CDS' stand for in credit risk modeling?
Credit Default Swap
Credit Derivative Security
Credit Deficiency System
Credit Disclosure Statement
#6
Which of the following risk management techniques involves transferring the risk to a third party?
Risk retention
Risk mitigation
Risk avoidance
Risk transfer
#7
Which of the following is NOT a common type of market risk?
Interest rate risk
Liquidity risk
Foreign exchange risk
Credit risk
#8
Which statistical distribution is commonly used in risk modeling for stock prices?
Normal distribution
Poisson distribution
Binomial distribution
Exponential distribution
#9
What does 'VaR' stand for in risk management?
Value at Risk
Variable Assessment Ratio
Volatility Adjustment Rate
Variance Adjustment Range
#10
What is the main purpose of stress testing in risk management?
To simulate extreme market conditions
To estimate expected losses
To calculate Value at Risk (VaR)
To assess operational risks
#11
What is 'correlation' in risk modeling?
The measure of how one variable moves in relation to another
The likelihood of an event occurring
The measure of dispersion of a probability distribution
The process of estimating future outcomes
#12
What is the purpose of backtesting in risk modeling?
To simulate future scenarios
To assess the accuracy of a model's forecasts
To estimate the probability of extreme events
To calculate the expected shortfall
#13
What is 'Monte Carlo simulation' commonly used for in risk modeling?
To calculate Value at Risk (VaR)
To forecast market returns
To estimate expected losses
To simulate a range of possible outcomes
#14
In risk management, what does 'ES' stand for?
Expected Sustainment
Extreme Situation
Expected Shortfall
Exponential Stability
#15
Which of the following is a limitation of the Black-Scholes model in option pricing?
It assumes constant volatility.
It cannot be used for European options.
It doesn't consider interest rates.
It requires complex mathematical computations.
#16
In credit risk modeling, what does the 'LGD' stand for?
Loss Given Default
Leverage Gain Divergence
Liquidity Gap Determination
Longitudinal Gradient Descent
#17
What is 'fat-tailed distribution' often used to represent in risk modeling?
Extreme events with higher likelihoods
Normal market conditions
Stable and predictable outcomes
Economic recessions
#18
In option pricing models, what does 'implied volatility' refer to?
Volatility calculated from historical data
Volatility inferred from option prices
Volatility adjusted for market trends
Volatility forecasted using regression analysis