Financial Risk Manager Part 1
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After arranging the data of a portfolio comprising of two assets X and Y from the period 2012 to 2016, it is found that the number of concordant data pairs is 2 and the number of discordant pairs is 4. On the basis of this information, which of the following is closest to the Kendall τ?
Other
Community
NNikitesh
A
-0.2
B
0.2
C
-0.08
D
0.08
Explanation:
The Kendall τ (tau) coefficient is calculated using the formula: τ = (n_c - n_d) / (n(n-1)/2), where n_c is the number of concordant pairs, n_d is the number of discordant pairs, and n is the number of observations.
Given:
- Number of observations (n) = 5 (from 2012 to 2016)
- Number of concordant pairs (n_c) = 2
- Number of discordant pairs (n_d) = 4
First, calculate the total number of pairs: n(n-1)/2 = 5*(5-1)/2 = 5*4/2 = 20/2 = 10
Then calculate τ: τ = (2 - 4) / 10 = -2/10 = -0.2
Therefore, the closest value to Kendall τ is -0.2.
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