Using a wrong formula for CAPM is a __  (select one) a. Erronous model risk b. Market data processing risk c. Incorrect calibration risk d. Incorrect implementation risk

Q: Why will the standard deviation not be a good measure of risk when returns are negatively skewed

A: The standard deviation of returns is a measure of the volatility of market returns and determines…

Q: Which of the following is false of the historical VaR?  a. It is based on normal distribution of…

A: Ans. Historical VaR do makes use of Monte Carlo Simulation.

Q: ssment of stand-alone basis of asset, which of the following scenarios is correct?   Using a bar…

A: Standard deviation is the measure of risk of security and shows dispersion from mean.

Q: A security with only diversifiable risk has an expected return that exceeds the riskfree rate of…

A: Unsystematic risk is another term for diversifiable risk. The risk that may be quantified and…

Q: Which of the following method is not used by technical analysis? Select one: Economics forecasting…

A: Technical Analysis :- It is an type of Financial analysis in which an technical analysis puts…

Q: Explain the difference between systematic and unsystematic risk. Also explain why one of these types…

A: Financial markets are full of financial risks because these markets are related to the trade of…

Q: Which of the following risks can be eliminated through diversification? a. Systematic risk b.…

A: Idiosyncratic risk is a risk for a particular investment or company. It is also called unsystematic…

Q: The WACC is an estimate.  Explain what the risk is of estimating the WACC lower than a company’s…

A: Wacc - it stands for weighted average cost of capital . it means cost of capital used to calculate…

Q: As a risk measure, Expected shortfall is more accurate and reliable in comparison to Value-at-Risk.…

A: This is to compare and find out which one is more better among expected shortfall and Value-at-Risk.…

Q: Money-market covered hedges can have variable outcomes while options are certain.   Group of answer…

A: Money market hedge is the hedging technique of locking the future value od exchange rate using money…

Q: Assets A and B have identical betas and standard deviations equal to 0% and 10%, respectively. Which…

A: Asset A and Asset B has the same beta Beta A = Beta B Standard Deviation of A = 0% Standard…

Q: there is uncertainty about monetary outcome and you are concerned about return and risk, then all…

A: Yes agreed to that above statement that there is no need of entire data distribution but standard…

Q: Standard deviation can be viewed as a measure of systematic and unsystematic risk combined True…

A: Standard deviation is the total risk of an asset or portfolio.

Q: If the security market is efficient in the strong form, then _____. Group of answer choices a. it…

A: There are three forms of market hypothesis weak form, semi-strong form and strong form

Q: What does a low standard error mean relative to beta

A: Beta is a very important metric in finance in general and in the world of investing in particular.…

Q: A criticism of the CAPM is that it: А. utilizes too many factors. В. ignores the risk-free return C.…

A: CAPM provides an explanation on relationship between systematic risk and expected return on assets.

Q: The efficient frontier measures risk by using: Group of answer choices B. Correlation A. Risk-free…

A: Efficient frontier refers to the graphical representation of the set of optimal portfolios…

Q: Why do conflicts sometimes arise between the netpresent value (NPV) and internal rate of return(IRR)…

A: The basic assumption between NPV and IRR method is the cash flows are reinvested. In the NPV method,…

Q: The slope of the security market line cannot be negative. Begin your answer with Consistent or…

A: Inconsistent. Capital Asset Pricing Model is used to determine the relationship between the expected…

Q: "If a security plots below the security market line, it is: " O ignoring all of the security's…

A: Security market line : Security market line represents the beta and expected return of a security on…

Q: Explain the difference between a linear risk and a nonlinear risk.

A: Linear risk is an enterprise's risk, based on the traditional economic system of "take-up-dispose."…

Q: Diversification is not at all effective when security returns are __________. a. High b. Negatively…

A: Diversification is a method that mixes a wide variety of investments within a portfolio. The main…

Q: A financial risk is not possible to evaluate with Select one from the following options. mean value…

A: Financial risk is the risk or probability of loss made on an investment. There are various inputs…

Q: Market risk is referred to as:   systematic risk. total risk. diversifiable risk. asset specific…

A: Answer 1. Market risk is referred to as? Market Risk: When an investor might lose money because of…

Q: Finaancial risk is not directly associate with..    a) ROE b) EBIT c) EPS d) EAT

A: The Financial risk is a risk of loosing money on am investment or investment opportunities.…

Q: The slope of the security market line cannot be negative. Begin your answer with Consistent or…

A: The slope of the security market line is inconsistent with the market changes.

Q: The audit risk model consists of: AR = IR x R x DR. The detection risk is the dependent variable.…

A: Detection Risk dependent on the level of inherent risk and level of control risk. The relationship…

Q: It could be said that strategy invalidates the net present value rule Explain the reasoning behind…

A: The net present value rule is an investment concept stating that projects should only be engaged in…

Q: A market order has:a. Price uncertainty but not execution uncertainty.b. Both price uncertainty and…

A: A market order is an order to buy or sell a stock at the best available price, to be executed…

Q: 1.) Which is false concerning standard deviation? a. The smaller the standard deviation is the less…

A: Standard deviation measures the deviations of dataset from the expected mean . In finance, standard…

Q: Beta and standard deviation differ as risk measures in that beta measures:a. Only unsystematic risk,…

A: Beta and SD (standard deviation), both are the indicator of the risks but the only difference is…

Q: With regard to dynamic risk strategies, MGRM was subject to: Group of answer choices B.…

A: Answer : D Both A&B

Q: By choosing assets that do not exhibit a high positive covariance with each other, the systematic…

A: Systematic risk is the risk associated with the market and is inherited to all securities in the…

Q: Standard deviation measures which type of risk? Select one: a. Total b. Non diversifiable c.…

A: STANDARD DEVIATION IS USED AS AN INDIACATOR OF MARKET VOLATILITY AND THUS OF RISK .

Q: Which of the following method is not used by technical analysis?   Select one: Economics…

A: Technical analysis is a method of analysis in finance which is used for forecasting the direction of…

Q: Which of the following statements is NOT an explanation of Efficient Market Hypothesis violations?…

A: A market is regarded is inefficient only if: The current price of a security fully reflects all…

Q: The most common measure of loss associated with extremely negative returns is          A)   lower…

A: Value at risk is one of the measure of loss associated with investments. The term measures how much…

Q: As a risk measure, Expected shortfall is more accurate and reliable in comparison to Value-at-Risk.…

A: Introduction : The expected shortfall (ES) can be understood as the risk measure—a notion employed…

Q: If the market is efficient with respect to one information set i.e. either weak, semi-strong or…

A: Market efficiency refers to the reflection of the current prices of all the relevant information…

Q: Technical Analysis (the practice of analyzing past stock price and volume data in order to predict…

A: The efficient market hypothesis (EMH), also known as the efficient market theory, claims that stock…

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.