Financial Risk Manager Part 1
Get started today
Ultimate access to all questions.
A risk analyst at a bank is explaining to an intern the use of the Arbitrage Pricing Theory (APT) in estimating the expected return of a security. The risk analyst uses the following APT formula in the discussion:
Which of the following is a correct interpretation of ?
A risk analyst at a bank is explaining to an intern the use of the Arbitrage Pricing Theory (APT) in estimating the expected return of a security. The risk analyst uses the following APT formula in the discussion:
Which of the following is a correct interpretation of ?
Exam-Like
A
It is a coefficient measuring the effect of changes in the rate of return of security k on the expected value of factor l.
B
It measures the difference between the observed and expected values of factor k.
C
It measures the idiosyncratic random shock to the price of security i which has a mean of zero.
Comments
Loading comments...