Financial Risk Manager Part 1
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Consider the following five random variables:
- A standard normal random variable; no parameters needed.
- A student's t distribution with 10 degrees of freedom; df = 10.
- A Bernoulli variable that characterizes the probability of default (PD), where PD = 4%; p = 0.040
- A Poisson distribution that characterizes the frequency of operational losses during the day, where lambda = 5.0
- A binomial variable that characterizes the number of defaults in a basket credit default swap (CDS) of 50 bonds, each with PD = 2%; n = 50, p = 2%
Which of the above has, respectively, the lowest value and highest value as its variance among the set?
Consider the following five random variables:
- A standard normal random variable; no parameters needed.
- A student's t distribution with 10 degrees of freedom; df = 10.
- A Bernoulli variable that characterizes the probability of default (PD), where PD = 4%; p = 0.040
- A Poisson distribution that characterizes the frequency of operational losses during the day, where lambda = 5.0
- A binomial variable that characterizes the number of defaults in a basket credit default swap (CDS) of 50 bonds, each with PD = 2%; n = 50, p = 2%
Which of the above has, respectively, the lowest value and highest value as its variance among the set?
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