Malz, Chapter 11: Assessing the Quality of Risk Measures Practice Question set contains 8 pages covering the following learning objectives:
* Describe ways that errors can be introduced into models.
* Explain how model risk and variability can arise through the implementation of VaR models and the mapping of risk factors to portfolio positions.
* Identify reasons for the failure of the long-equity tranche, short-mezzanine credit trade in 2005 and describe how such modeling errors could have been avoided.
* Explain major defects in model assumptions that led to the underestimation of systematic risk for residential mortgage-backed securities (RMBS) during the 2007- 2009 financial downturn.
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