Financial Risk Manager Part 1
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Which of the following is the first step in a typical iid bootstrapping?
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NNikitesh
A
Generating data according to an assumed distribution
B
Constructing a bootstrap sample
C
Selecting an appropriate block size
D
Generating a set of a random collection of m integers (1,2,3...n) with replacement
Explanation:
The first step in iid bootstrapping is generating a set of m integers (i₁, i₂, i₃, ..., iₘ) from {1,2,3...,n} with replacement, which is then followed by the construction of a bootstrap sample.
Explanation:
- Option D is correct because in iid (independent and identically distributed) bootstrapping, we start by randomly selecting indices from the original sample with replacement to create a bootstrap sample.
- Option A is incorrect because generating data according to an assumed distribution is the first step in Monte Carlo simulation, not bootstrapping.
- Option B is incorrect because constructing a bootstrap sample comes after generating the random indices.
- Option C is incorrect because selecting an appropriate block size is the first step in Circular Block Bootstrap (CBB) bootstrapping, not iid bootstrapping.
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