Sie sind auf Seite 1von 54

www.edupr i st i ne.

com
FRM Part I
Quantitative Anal ysis
21st May 2011
Neev Knowl edge Management Pr i st i ne
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
Agenda
Introduction and context
Understanding the FRM Examination Structure
Introduction to Quantitative Analysis
Probability Distributions
Key Concept Checkers
Complete Offering & Registration
Next Seminar
2
www.edupr i st i ne.com
Seminar Material
Not for Sale
Pristine has been started by professionals with diverse experience in
financial services, IT and Auto who are alumnus of IITs & IIMs
Pristine
Classroom/ Online delivery
(synchronous and
asynchronous) To increase
reach and improve efficiency of
learning. Conducted 15+
batches with over 300 hours of
recorded content
Innovative content To improve
understanding & learning capability of
students. VisualizeFRM,
VisualizeCFA as one of the best
selling products
Founded with an aim
of creating world
class professionals in
the area of finance
particularly risk
management and
investment banking
Topic Expert Model (TEM ) Industry
professionals bring invaluable industry
perspective for students. Pool of 300+
working professionals as active faculty
members with the likes of CFA regional
directors, Presidents of various banks
Testimonial - 53% of the students join us on the
basis of referral is a testimonial of the effective
training methodologies
Effective training methodologies to improve the performance
of the students and enhance the employability
Neev Knowl edge Management Pr i st i ne
3
www.edupr i st i ne.com
Seminar Material
Not for Sale Key Authorization
GARP (2007-10)
Authorized Training provider -FRM
Largest player in India in the area of risk
management training. Trained 1000+students
in risk management
PRMIA (2009-10)
Authorized Training provider PRM/ APRM
Sole authorized training for PRM Training in
India. Largest player in India in the area of risk
management training. Trained 1000+students
in risk management
CFA Institute (2010-11)
Authorized Training provider CFA
Pristine is now the authorized training provider
for CFA Exam trainings . Pristine is largest
training provider for CFA in India with presence
across seven major cities.
FPSB India (2010-11)
Authorized Training provider -CFP
An authorized Education Provider for
Chartered Financial Planner Charter.
Neev Knowl edge Management Pr i st i ne
www.edupr i st i ne.com
Seminar Material
Not for Sale Key Associations*
HSBC (2008)
Risk Management and Quant. Analysis
New joinees in HSBC had a gap in
knowledge of Risk Management and
quantitative skills. Conducted trainings
(On campus) to bridge the gap
*Indicative List
Mizuho (2010)
Financial Modeling in Excel
Bankers were using excel models that
they could not understand. Conducted
financial modeling in Excel trainings to
bridge the gap
Bank Of America
Continuum Solutions (2010)
Financial Modeling in Excel
Associates were trained on valuation and
mergers and acquisitions
J. P. Morgan (2010)
Financial Modeling in Excel
The Real Assets Group were trained in
Excel for infrastructure and real-estate
modeling
Franklin Templeton
CFA (2010)
Students were facing a gap in the
overall understanding of finance
topics like corporate finance, FSA and
valuation. Provided training for over
100 hours to bridge the gap
Credit-Suisse India (2009)
Risk Management and Quant. Analysis
IT Professionals of Credit-Suisse India
were trained on risk management.
Neev Knowl edge Management Pr i st i ne
www.edupr i st i ne.com
Seminar Material
Not for Sale
Key Associations
IIM Calcutta (2010-11)
Financial Modeling in Excel
Students about to go for internships and
join jobs found a gap in their grasp of
knowledge of excel for financial
modeling. Conducted training for 75+
students with an average rating of 4.5+
BITS Pilani (2009)
Workshops on Basics of Finance
Most of the students desire a career
in finance. Conducted training for
350+students with an average rating
of 4.5+
IIT Delhi (2009)
Corporate finance
Students get placed in finance
companies (UBS, GS, MS, etc) with
no understanding of the subject/ J ob
Profile. Conducted workshop to
bridge the gap
Sydneham College (2009)
Financial Modeling in Excel
Students about to join jobs found a
gap in their grasp of excel for financial
modeling. Conducted 40+hours of
training and helped students be ready
for job
NISM (2008)
Derivatives workshop for Hedging
Corporate in Ludhiana incurred huge
losses because of derivative trades
(for hedging). Conducted trainings for
directors and CFOs for better
understanding of derivative products
FMS Delhi (2010-11)
Financial Modeling in Excel
Final Year MBA students of Faculty of
Management Studies, Delhi University
were trained in financial modeling so as
to prepare them better for a job in
finance.
Neev Knowl edge Management Pr i st i ne
www.edupr i st i ne.com
Seminar Material
Not for Sale
Trainer
Pawan Prabhat, Director and Faculty, Pristine
Neev Knowl edge Management Pr i st i ne
Pawanhas experience in the area of risk management and investment banking. He has worked in
the area of risk management and investment banking. Pawan is a co-founder of Pristine and has earlier
worked in senior management positions in Crisil S&P and Standard Chartered Securities. He has
also worked in the IT industry in companies like Geometric Software and Wipro.
Pawanhas successfully managed various IPOs worth more than 300 crores and has been the main
point of contact with the promoters and the funds. Some of the IPOs in which has played instrumental
roles are
Insecticide India
NitinFire
Nelcast
Barak Valley
Precision Pipes
Indowind
Pawanhas done his MBA from IIM Indore and is a B. Tech from IIT Bombay in mechanical
engineering. Pawan has published research paper and has co-authored articles on risk management in
national finance daily- Hindu Business Line
He is an avid reader and has been involved in dramatics, quizzing and bridge.
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
Agenda
Introduction and context
Understanding the FRM Examination Structure
Introduction to Quantitative Analysis
Probability Distributions
Key Concept Checkers
Complete Offering & Registration
Next Seminar
8
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne Car eer s
9
FRM 2011
Area Weight
Foundations of Risk Management 20%
Quantitative Analysis 20%
Financial Markets and Products 30%
Valuation and Risk Models 30%
100 MCQ, 4 hours test in pen and paper, May21, 2011
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
10
FRM Exam Statistics
12%
23%
30%
35%
2009 FRM Sample Paper
Foundation of Risk
Management
Quantitative Analysis
Financial Markets and
Products
Valuation and Risk Models
12%
20%
40%
28%
2010 FRM Sample Paper
Foundation of Risk
Management
Quantitative Analysis
Financial Markets and
Products
Valuation and Risk Models
From the trend seen in FRM exam, 65%-70% of the questions come from two topics, Financial
Markets and Products, and Valuation and Risk Model.
In FRM Part-I, our estimate is that if a candidate manages to earn Quartile-1 scores in Financial
Markets and Products, and Valuation and Risk Model, one should comfortably pass the exam even if
the candidate does not do so well in QA and Foundation of Risk Management.
Source: GARP Sample Paper
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
11
Foundation of
Risk
Management
Quantitative
Analysis
Financial
Markets and
Products
Valuation and
Risk Models
Numerical 1 4 5 11
Subjective 4 5 7 3
0
2
4
6
8
10
12
2010
Foundation of
Risk
Management
Quantitative
Analysis
Financial
Markets and
Products
Valuation and
Risk Models
Numerical 3 6 8 4
Subjective 2 2 8 3
0
1
2
3
4
5
6
7
8
9
2009
Numerical vs Subjective Questions
There is no fixed ratio of Numerical and subjective questions in any of the subject.
In valuation and risk models, numerical questions are favorite to GARP
To score in Quartile-1 in Financial Markets and Products, and Valuation and Risk Models you need to
solve as many questions as you can.
Source: GARP Sample Paper
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
12
0
2
4
6
8
10
12
14
16
18
Foundation of
Risk
Management
Quantitative
Analysis
Financial
Markets and
Products
Valuation and
Risk Models
N
u
m
b
e
r

o
f

Q
u
e
s
t
i
o
n
s
2010
2009
Number of Questions Year-wise
Source: GARP Sample Paper
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
Agenda
Introduction and context
Understanding the FRM Examination Structure
Introduction to Quantitative Analysis
Probability Distributions
Key Concept Checkers
Complete Offering & Registration
Next Seminar
13
www.edupr i st i ne.com
Seminar Material
Not for Sale
Quantitative Anal ysis
Neev Knowl edge Management Pr i st i ne
Quantitative Anal ysis
Statistics and
Probability
Probability
Distributions
Sampling &
Hyp. Testing
Regression
Analysis
EWMA
GARCH
Basics of
Probability
Population
and Sample
Statistics
Properties of
Distributions
Discrete/
Continuous
Binomial
Distribution
Normal
Distribution
Standard
Error
Formulating
Hypothesis
Type I and II
Errors
Linear
Regression
Multiple
Regressors
OLS
Error Analysis
Heteroscedac
ity
Estimating
Volatility and
Correlation
Monte Carlo
Volatility Term
Structures
Reference Book - James Stock and Mark
Watson, Introduction to Econometrics, Brief
Edition (Boston: Pearson Education, 2008).
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
15
Probability Distribution
A Random Variable is a function, which assigns unique numerical values to all possible outcomes of
a random experiment under fixed conditions. A random variable is not a variable but rather a function
that maps events to numbers
Probability distribution describes the values and probabilities that a random event can take place. The
values must cover all of the possible outcomes of the event, while the total probabilities must sum to
exactly 1, or 100%
Example
Suppose you flip a coin twice.
There are four possible outcomes: HH, HT, TH, and TT.
Let the variable X represent the number of Heads that result from this experiment
It can take on the values 0, 1, or 2.
X is a random variable (its value is determined by the outcome of a statistical experiment)
A probability distribution is a table or an relation that links each outcome of a statistical experiment with
its probability of occurrence
Number of heads (X) Probability P(X=x)
0 0.25
1 0.50
2 0.25
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
16
Continuous & Discrete Probability Distributions
If a variable can take on any value between two specified values, it is called a continuous variable
otherwise, it is called a discrete variable
If a random variable is a discrete variable, its probability distribution is called a discrete probability
For example, tossing of a coin & noting the number of heads (random variable) can take a discrete value
Binomial probability distribution, Poisson probability distribution
If a random variable is a continuous variable, its probability distribution is called a continuous
probability distribution
The probability that a continuous random variable will assume a particular value is zero
A continuous probability distribution cannot be expressed in tabular form.
An equation or formula is used to describe a continuous probability distribution (called a probability
density function or density function or PDF)
The area bounded by the curve of the density function and the x-axis is equal to 1, when computed over
the domain of the variable
Normal probability distribution, Student's t distribution are examples of continuous probability
distributions
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
17
Normal Distribution
Only Mean and Standard Deviation is required to fully understand a distribution
68% of Data
95% of Data
99.7% of Data
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
18
Normal (Gaussian) Distribution
The normal distribution is defined by first two moments, mean() and variance(o
2
)
The probability density function P(x) of normally distributed variable is given by:
The probability of the value lying between a and b is given by:
The expected value of a normally distributed variable: E[X]=,
The variance of normally distributed variable: Var(X)=o
2
If two variables are individually normally distributed, then the linear combination of the both is
also normally distributed.
Lets take an example of two variable X
1
and X
2
which are normally distributed such that:
X
1
~N(
1
,o
1
) and X
2
~N(
2
,o
2
)
Then X=a.X
1
+b.X
2
is also normally distributed.
)
`


=
2
2
2
2
) (
exp
2
1
) (

x
x P
}
= s s
b
a
dx x P b X a P ). ( ) (
The skewness of normal distribution is = 0 and the kurtosis is =3
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
19 19
FRM Exam 2008
Which type of distribution produces the lowest probability for a variable to exceed a specified extreme
value X which is greater than the mean assuming the distributions all have the same mean and
variance?
A. A leptokurtic distribution with a kurtosis of 4.
B. A leptokurtic distribution with a kurtosis of 8.
C. A normal distribution.
D. A platykurtic distribution
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
20 20
Answer
ANSWER: D
By definition, a platykurtic distribution has thinner tails than both the normal distribution and any leptokurtic
distribution. Therefore, for an extreme value X, the lowest probability of exceeding it will be found in the
distribution with the thinner tails.
A. Incorrect. A leptokurtic distribution has fatter tails than the normal distribution. The kurtosis indicates
the level of fatness in the tails, the higher the kurtosis, the fatter the tails. Therefore, the probability of
exceeding a specified extreme value will be higher .
B. Incorrect. Since answer A. has a lower kurtosis, a distribution with a kurtosis of 8 will necessarily
produce a larger probability in the tails.
C. Incorrect. By definition, a normal distribution has thinner tails than a leptokurtic distribution and larger
tails than a platykurtic distribution.
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
-4 -3 -2 -1 0 1 2 3 4
Platykurtic
K<3
Mesokurtic
K=3
Leptokutic
K>3
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
21 21
FRM Exam 2006
Which of the following statements is the most accurate about the relationship between a normal
distribution and a Students t-distribution that have the same mean and standard deviation?
A. They have the same skewness and the same kurtosis.
B. The Students t-distribution has larger skewness and larger kurtosis.
C. The kurtosis of a Students t -distribution converges to that of the normal distribution as the number of
degrees of freedom increases.
D. The normal distribution is a good approximation for the Students t-distribution when the number of
degrees of freedom is small.
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
22 22
Answer
ANSWER: C
The skewness of both distributions is zero and the kurtosis of the Students t distribution converges to that
of the normal distribution as the number of degrees of freedom increases.
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
23 23
FRM Exam 2006
Which one of the following statements about the normal distribution is NOT accurate?
A. Kurtosis equals 3.
B. Skewness equals 1.
C. The entire distribution can be characterized by two moments, mean and variance.
D. The normal density function has the following expression:
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
24 24
Answer
ANSWER: B
The skewness of the normal distribution is 0, not 1.
The kurtosis of the normal distribution is 3, the normal distribution can be completely described by its mean
and variance, and the density function of the normal distribution is as shown.
-4 -3 -2 -1 0 1 2 3 4
68% of Data
95% of Data
99.7% of Data
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
25 25
FRM Exam 2007
Let Z be a standard normal random variable. An event X is defined to happen if either z takes a value
between 1 and 1 or z takes any value greater than 1.5. What is the probability of event X happening
if N(1) =0.8413, N(0.5) =0.6915 and N(-1.5) =0.0668, where N() is the cumulative distribution function
of a standard normal variable?
A. 0.083
B. 0.2166
C. 0.6826
D. 0.7494
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
26 26
Answer
ANSWER: D
Let A be the event that z takes a value between 1 and 1 and B be the event that z takes a value greater
than 11/2 . The probability of z being between 1 and 1 is the area under the standard normal curve
between 1 and -1. From the properties of a standard normal distribution, we know that:
N(-1) =1.0 - N(1) =1.0 0.8413 =0.1587
Therefore, the probability of z being between 1 and 1 =P(A) = N(1) - N(-1) =0.6826
The probability of z being greater than 11/2 =P(B) =1 - N(11/2) =N(-11/2) =0.0668
Event X =A U B and P(X) =P(A) +P(B) since A and B are mutually exclusive.
Hence, P(X) =0.7494
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
-4 -3 -2 -1 0 1 2 3 4
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
27 27
FRM Exam 2007
When can you use the Normal distribution to approximate the Poisson distribution, assuming you have
"n" independent trials each with a probability of success of "p"?
A. When the mean of the Poisson distribution is very small.
B. When the variance of the Poisson distribution is very small.
C. When the number of observations is very large and the success rate is close to 1.
D. When the number of observations is very large and the success rate is close to 0.
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
28
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0 2 4 6 8 10 12 14 16 18 20 22 24
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28
0
0.02
0.04
0.06
0.08
0.1
0.12
0 2 4 6 8 10 12 14 16 18 20 22 24
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0 3 6 9 121518212427303336394245485154
=1
=5
=25 =15
Plots of Poisson Distribution
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
29 29
Answer
ANSWER: C
The Normal distribution can approximate the distribution of a Poisson random variable with a large lambda
parameter (). This will be the case when both the number observations (n) is very large and the success
rate (p) is close to 1 since = n*p.
INCORRECT: A, The mean of a Poisson distribution must be large to allow approximation with a Normal
distribution.
INCORRECT: B, The variance of a Poisson distribution must be large to allow approximation with a
Normal distribution.
INCORRECT: D, The Normal distribution can approximate the distribution of a Poisson random variable
with a large lambda parameter (). But since = n*p, where n is the number observations and p is the
success rate, will not be large if p is close to 0.
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
30 30
Questions 14 FRM Exam 2006
If Y =ln(X) and Y is normally distributed with zero mean and 2.33 standard deviation. What is the
expected value of X?
A. 15.10
B. 3.21
C. 227.90
D. 1
www.edupr i st i ne.com
Seminar Material
Not for Sale
ANSWER: A
Neev Knowl edge Management Pr i st i ne
31 31
Answer
Lognormal Distribution
www.edupr i st i ne.com
Seminar Material
Not for Sale
What is VaR ?
Value at Risk (VaR) has become the standard measure that financial analysts use to
quantify this risk
VAR represents maximum potential loss in value of a portfolio of financial instruments
with a given probability over a certain horizon
In simpler words, it is a number that indicates how much a financial institution can lose
with probability over a given time horizon
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
Agenda
Introduction and context
Understanding the FRM Examination Structure
Introduction to Quantitative Analysis
Probability Distributions
Key Concept Checkers
Complete Offering & Registration
Next Seminar
33
www.edupr i st i ne.com
Seminar Material
Not for Sale
About FRM Prep School
School for FRM Part I Prep is
a 100 Hrs extensive training program*
that can enable you
to prepare for and crack FRM Part I Examination
www.edupr i st i ne.com
Seminar Material
Not for Sale
About School for FRM Prep
School for FRM Prep is
a 100 Hrs extensive training program*
that can enable you
to prepare for and crack FRM Part I Exam
Extensive 100 Hours coverage
10days of regular classes
3 days of revision classes
2 Mock tests
Extensive Question Bank to
prepare and Practice
2 Hrs of one-to-one doubt
clearing sessions*
Qualified faculty with extensive
industry and teaching experience
=
www.edupr i st i ne.com
Seminar Material
Not for Sale
About School for FRM Prep
Proven credentials in successfully
training FRM aspirants
Actionable and Innovative Material
Complete Slide Pack
Each Session followed by Quiz
Adaptive feedback based on Quiz
Mock tests and feedback
Individual doubt solving session
FRM Visualized Formula Charts
Summarized Recordings for
revision
=
School for FRM Prep is
a 100 Hrs extensive training program*
that can enable you
to prepare for and crack FRM Part I Exam
www.edupr i st i ne.com
Seminar Material
Not for Sale
Tentative Schedule Feb-March
* Indicative list Subject to Change
Date Day Course Topic
26/Feb/11 Sat FRM-Part-I QuantitativeAnalysis - I
27/Feb/11 Sun FRM-Part-I QuantitativeAnalysis II
05/Mar/11 Sat FRM-Part-I QuantitativeAnalysis III
06/Mar/11 Sun FRM-Part-I QuantitativeAnalysis IV
12/Mar/11 Sat FRM-Part-I FMP -I
13/Mar/11 Sun FRM-Part-I FMP-II
26/Mar/11 Sat FRM-Part-I FMP-III
27/Mar/11 Sun FRM-Part-I FMP-IV
02/Apr/11 Sat FRM-Part-I VaR- I
03/Apr/11 Sun FRM-Part-I VaR- II
www.edupr i st i ne.com
Seminar Material
Not for Sale
How it works?
1 2 3 4 5
You signup for the program by making payment of USD 600*
*Early Bird Discount of USD
100 for registrations before
10thFeb
www.edupr i st i ne.com
Seminar Material
Not for Sale
How it works?
1 2 3 4 5
Start Preparation with material and Live Interactive Class
www.edupr i st i ne.com
Seminar Material
Not for Sale
How it works?
1 2 3 4 5
Work on the Problemsets/ Quizzes adapting preparation Style
www.edupr i st i ne.com
Seminar Material
Not for Sale
How it works?
1 2 3 4 5
Give Mock Tests/ Ask Doubts/ Revise and Complete Preparation
www.edupr i st i ne.com
Seminar Material
Not for Sale
How it works?
1 2 3 4 5
Plan and Achieve Success in FRMPart I Exam
www.edupr i st i ne.com
Seminar Material
Not for Sale
Methodology
Each topic will be explained through
Conceptual Discussion, Examples, Tests, Quizzes, Actionable
Presentations, Visualized Charts and Q&A
www.edupr i st i ne.com
Seminar Material
Not for Sale
Sample Innovative Material
Neev Knowl edge Management Pr i st i ne
44
Probability
Distributions
Normal Distribution Binomial Distribution
Normal
Distribution
Described bymean&variance
Symmetricabout its mean
StandardNormal Distribution
- Mean=0; Variance=1
Z-Score
Skewness and
Kurtosis
No. of a given
observation is away
frompopulationmean.
Z=(x-)/
Q. At a particular time, the market value
of assets of the firmis $100 Mn and the
market value of debt is $80 Mn. The
standard deviation of assets is $ 10 Mn.
Whatis the distanceto default?
Ans. z =(A-K) /
A
=(100-80)/10
=2
If Zisastandardnormal R.V. Anevent Xisdefinedtohappenif either -1<Z<1or
Z>1.5. What istheprob. of event Xhappeningif N(1) =0.8413, N(0.5) =0.6915
andN(-1.5)=0.0668, whereNistheCDFof astandardnormal variable?
Ans. P(X)=P(-1<Z<1) +P(Z>1.5)
=N(1)-(1-N(1))+N(-1.5)
=2*0.8413-1 +0.0668
=0.7494
-1 +1 1.5
-4 -3 -2 -1 0 1 2 3 4
68%of Data
95%of Data
99.7%of Data
Q. Which of the following is likely to be a probability distribution
function?
For X=[1,2,3,4,5], Prob[X
i
]=49/(75-X
i
2
)
For X=[0,5,10,15], Prob[X
i
]=X
i
/30
For X=[1,4,9,16,25], Prob[X
i
]=[(X
i
)
1/2
1]/5
Ans. The correct answer is For X=[0,5,10,15], Prob[X
i
]=X
i
/30
For all values of X, probability lies within [0,1] and sum of all the
probabilitiesis equal to 1.
www.edupr i st i ne.com
Seminar Material
Not for Sale
Sample Innovative Material
Neev Knowl edge Management Pr i st i ne
45
H
0
:
2
=c
H
A
:
2
c
Inference
Based on
Sample Data
Real State of Affairs

H0 is True H0 is False
H0 is True
Correct decision
Confidence level =1- o
Type II error
P (Type II error) =|
H0 is False
Type I error
Significance level =o*
Correct decision
Power =1-|
*Termo represents the maximumprobability of committing a
Type I error


Null
HYPOTHESIS:H
0
Alternative
Hypothesis: H
a
One tailed
Test
Two Tailed test
Hypothesis that
the researcher
wants to reject
Concluded if there is
significant evidence
toreject H
0
Test if the value is greater
thanor less thanK
H
0
; <=K vs. H
a
: >K
Test if the value is
differentfromK
H
0
; =0 vs. H
a
: 0
Type 1 error: rejection of H
0
when it
is actuallytrue
Type 2 error :Fail to reject H
0
when
itis actuallyfalse
Q. Co. ABC would give bonus to employees, if they get a
rating higher than 7/10 fromcustomers. A randomsample
of 30 customers is conducted with rating of 7.1/10.
FormulateHypothesis?
Null Hypothesis: H
0
: Mean<=7
AlternateHypothesis : H
1
: Mean>7
Statistic to be measured: t-statistic, with29DoF
Range of values within which
H
0
Cannot be rejected (say
90%or 95%).
Known variance, 2 Tailed test,
CI is: Xz
/2
(/t)
Confidence Intervals
(CI)
Do not reject H0 Reject H0
o

_
2
H
0
:
2

0
2
H
A
:
2
>
0
2
Upper tail test:
2
2
2

1)s (n
=
F
o/2
F
o/2
Reject H
0
Do not
reject H
0
H
0
:
1
2

2
2
=0
H
A
:
1
2

2
2
0
Hypothesis Tests
for Variances
Tests for a Single
Population Variances
Tests for a two
Population Variances
F test Chi-Square test
H
0
:
1
2

2
2
=0
H
A
:
1
2

2
2
0
2
2
2
1
s
s
F =
Q. If standard deviation of a
normal populationis known to be
10 & the mean is hypothesized
to be 8. Suppose a sample size
of 100is considered. What is the
range of sample means in which
hypothesis can be accepted at
significancelevel of 0.05?
Ans: SE = =10/100=1
z =(x-)/ SE
=(x-8)/1
At 95%-1.96<z<1.96
Therefore6.04<x<9.96
n

0
0.05
0.1
0.15
0.2
-5 0 5 Z=0 Z=2.5
Do not Reject H0
Reject H0
=0.05
Z=0
Do not Rej ect H0
Reject H0
=0.025
0
0.05
0.1
0.15
0.2
-5
=0.025
Reject H0
Hypothesis
Testing
www.edupr i st i ne.com
Seminar Material
Not for Sale
What to expect at the end?
Towards the end of School for FRM Prep*
You will be able to learn the topics related to FRM Part I Exam
You will know how to solve the questions asked in FRM Part I Exam
You will get an industry perspective of the topics
*assuming you follow the program and practice
www.edupr i st i ne.com
Seminar Material
Not for Sale
About the Program
Venue: Online
Starting Date: 26 Feb, 2011
www.edupr i st i ne.com
Seminar Material
Not for Sale
Cost of the Program
USD 595
For individual registrations
USD 475
For participants joining in groups of 5 or more
USD 525
For registrations before 10
th
February
www.edupr i st i ne.com
Seminar Material
Not for Sale
Contact Details
Questions & Doubts?
Please e-mail me at pawan@edupristine.com
or visit http://www.edupristine.com
or call +91 986 762 5422
www.edupr i st i ne.com
Seminar Material
Not for Sale
To Register
Wire Transfer
Bank Name: HDFC Bank
Country: India
Swift Code: HDFCINBB
Account Name: Neev Knowledge Management Pvt Ltd
Account Number: 00602560008449
Paypal to Paypal (Preferred)
Create a Personal paypal account (it is free)
After Logging in, click on tab "My Account" and then on "Profile". Link Paypal account with your credit card
or bank account
Click on the tab "Send Money"
In the "To" tab enter the email id paypal@edupristine.com
Pay the fees as per package required.
Credit Card to Paypal
You can make the payment from your credit card to Paypal account.
Please make the payment to email id paypal@edupristine.com
Neev Knowl edge Management Pr i st i ne
www.edupr i st i ne.com
Seminar Material
Not for Sale
Course Classroom Trainings Online
Trainings
Content Crash
Course/
Mock Test
Hours
of
Training
Accreditation
CFA Level I All* +Singapore** Yes Original Yes 100 CFA Institute
CFALevel II Mumbai, Delhi From 2010 Original From2010 80 CFA Institute
FRM Level I All +Singapore Yes Original Yes 75 GARP
FRM Level II Mumbai, Delhi Yes Original Yes 60 GARP
PRM All +Singapore Yes Original Yes 135 PRMIA
APRM Corporate From 2010 Original Yes 80 PRMIA
Financial Modeling Mumbai, Delhi,
Bangalore
Yes Original NA 50 -
Finance for Lawyers Mumbai No Original NA 50 -
CFP Mumbai, Delhi Yes Original NA 120 Under Process
Placement Oriented
Training
Colleges No Original NA 150 Not Required
*All cities include Mumbai, Delhi, Kolkata, Chennai, Bangalore, Pune and Hyderabad ; ** Singapore class room trainings to commence from June 2010
Other Pristine Offerings
Neev Knowl edge Management Pr i st i ne
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
Agenda
Introduction and context
Understanding the FRM Examination Structure
Introduction to Quantitative Analysis
Descriptive Statistics
Key Concept Checkers
Complete Offering & Registration
Next Seminar
52
www.edupr i st i ne.com
Seminar Material
Not for Sale
Neev Knowl edge Management Pr i st i ne
53
Value at Risk (VaR)
13 Feb, 2011
www.edupr i st i ne.com
Seminar Material
Not for Sale
Contact
Contact Phone Email
Pawan Prabhat +91 986 762 5422 pawan@edupristine.com
Paramdeep Singh +91 989 298 0608 paramdeep@edupristine.com
Neev Knowl edge Management Pr i st i ne

Das könnte Ihnen auch gefallen