Lecture_9_Questions

Lecture_9_Questions - Lecture 9 Questions and Answers 1....

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Lecture 9 Questions and Answers 1. Model risk is less of a problem for: a) Nonlinear products b) Actively traded products c) Structured products Answer: B 2. Which one of the following is not a problem related to using models for valuation? a) Behavior of individuals b) Parameters of the model when they’re constant c) Overfitting d) Overparameterization e) None of the above Answer: E 3. Which institution below uses contrarian investment strategies with more ease? a) Mutual funds b) Fed Reserve c) Pension funds d) Hedge funds e) Banks
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Answer: D 4. Which one of the following is not a reason why herd behavior happens? a) Because the computer models used by different traders are similar. b) Because all FIs are regulated in the same way. c) Because of the natural tendency of traders. d) Because traders focus on short-term strategies instead of focusing on long-term strategies. e) To create diversity by long-term vs short-term strategies. Answer: E 5. Which one of the following is not true about liquidity black holes? a)
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Lecture_9_Questions - Lecture 9 Questions and Answers 1....

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