Financial Risk Manager Part 2

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Explanation:

The correct answer is D.

Under age-weighted (aka Hybrid) historical simulation, the weight, $w_i$ , given to an observation $i$ days old is given by:

w_i = \frac{\lambda^{i-1}(1 - \lambda)}{(1 - \lambda^n)}

So,

w_{45} = \frac{0.96^{45-1}(1 - 0.96)}{(1 - 0.96^{100})} = 0.006751

Note. Any return falling outside the historical window would have a weight of zero, for instance, the observation made 109 days ago.

Explanation:

The correct answer is D.

Under age-weighted (aka Hybrid) historical simulation, the weight, $w_i$ , given to an observation $i$ days old is given by:

w_i = \frac{\lambda^{i-1}(1 - \lambda)}{(1 - \lambda^n)}

So,

w_{45} = \frac{0.96^{45-1}(1 - 0.96)}{(1 - 0.96^{100})} = 0.006751

Note. Any return falling outside the historical window would have a weight of zero, for instance, the observation made 109 days ago.

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Last updated: July 5, 2026 at 07:08

0.05.

0.0025.

0.0065.

0.006751.