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business
principles of managerial statistics

Questions and Answers of Principles Of Managerial Statistics

A researcher has taken up a project to compare property price return series between two cities in India, which are presented in Table 2.6. The range of changes is summarized in the form of
What is the main difference between ‘Cluster Sampling’ and‘Stratified Random Sampling’? Which one is advantageous? How will you conduct stratified random sampling from a data file?
If loan exposures are divided in five sectors in the ratio of 3:3:2:1:1, find the HHI of the portfolio of the sector:a) 3000
If the Rs. 15,000 crores is distributed amongst a pool of 15 borrowers in the following manner:Find out the HHI and comment on the loan pool’s degree of concentration?Also find out the effective
A researcher has obtained following Lorenz curve by plotting income and population distribution in a country XYZ.The area ‘A’ has been estimated as 0.20 and area B as 0.30. Now calculate the Gini
Write the difference between CV and Percentile.
What is the difference between the Theil inequality and Lorenz Curve?
What is the difference between population and sample? How sampling error can be minimized?
Which option is correct? For ungrouped data, kth decile would bea) k(n + 1) / 10b) k(n + 1) / 100c) k(n + 1) / 4d) k(n + 1) / 50
Tick the right option. The coefficient of variation is measured by which formula:a) Mean / SDb) SD / Meanc) SD × Meand) SD + Mean
Is it true that in a fit test, the higher the value of Chi2, the lower the probability would be that the actual distribution of the data series would be deviated from the hypothesized one? 0
If the price of a traded bond has 20 observations, mean value = Rs. 40 and SD = 10, Skewness = 2, and Kurtosis = 6.Whether the estimated Jarque- Bera value (JB) would be greater than the table value
On a test of rating various borrowers, the average borrower score was 74 and the SD was 7.If 12% of the classes are given a rating of ‘A’s, and the grades are curved to follow a normal
What is the difference between mutually exclusive events and independent events?
If the probability of scoring no goals in a tournament (event A) is 20% and scoring exactly 1 (event B) is 15%, then find out the probability of scoring non- goals and 1 goal. Also find out the
Is there any difference between mutually exhaustive events and mutually exclusive events?
A card is drawn from each of two well- shuffled packs of cards. Find the probability of at least one of them is an ace.
The probability that a math teacher will take a surprise test during any class session is 1/
If a student is absent twice, what is the probability that they will miss at least one test?
A loan portfolio contains 8 AA and 6 BB categories of assets. If 5 accounts are drawn by the auditor at random, what is the probability that 3 are AA and 2 are BB?
If the probability of back office staff leaving the treasury job is 0.40, probability of transaction error = 0.60; and probability of both happening= 0.30. Then, estimate the probability of
If the probability of transaction error = 0.20 and the probability of system failure = 0.50, what is the probability that a transaction failure will happen when there is system failure?
The probability that Ashok can solve a problem in business statistics is 4/ 5, that Johny can solve it is 2/ 3, and that Abdul can solve it is 3/
If all of them try independently, find the probability that the problem will be solved?
How to estimate probability for repeated drawings with replacement?How it is useful for the risk managers?
The probability that a corporate project loan will be approved by a bank is 0.4. Determine the probability that out of 5 entering loan proposals, (a) none, (b) one, and (c) at least one will be pass
What is Bayes’ theorem? How it can be used to predict default risk of a loan?
What are the major differences between continuous distribution and discrete distribution?
How will you identify a discrete distribution?
How to fit a normal distribution in Excel?
How to predict security prices using Standard Normal Z statistic?
Try to perform fit tests using Palisade @RISK
What are the popular candidates of non- normal distributions for operational risk?
What distribution is popularly used in market risk assessment? Why?
If the life of a personal loan in days is assumed normally distributed with mean life = 155 days and SD = 19 days, what is the probability that life of a borrower less than 117 days, more than 193
A market risk analyst is examining the loss rate from a bond return series. The bond rating is BBB. The return series has been analysed and statistical hypothesis is conducted (mean comparison test)
Now the same analyst examines bond loss rate where she hypothesizes that the mean loss rate would be 80 basis points. The test results are summarized in Table 4.14:What would be the decision of the
Which statement is correct?The higher the value z- statistic, the greater the chance that the null hypothesis of equal mean between two groups will bea) Acceptedb) Rejectedc) Uncertaind) Undefined
A researcher wants to empirically test if a sample of retail borrowers’debt to income ratio (DEBTINC) significantly differs by their default status (defaulted vs. non- defaulted; coded by 1 and 0).
Suppose you test the effectiveness of a new fuel additive. You run an experiment with 24 cars: 12 cars with the fuel treatment and 12 cars without. You input the dataset with 24 observations. The
Which option is the correct statement? In a hypothesis test, type I error refers to whena) A null hypothesis is accepted when it is trueb) A null hypothesis is rejected when it is truec) A null
Select the write option. Jarque- Berra (JB) statistics followa) Normal distributionb) T- distributionc) F- distributiond) Chi2 distribution
In ANOVA test, if between- sum squared is 100 and within- sum squared is 200 and there are four groups and 20 observations per group, the estimated Fisher’s F- statistic would bea) < 5b) 5– 10c)
Based on the above results, now comment whether ANOVA F- test is statistically significant?a) p- value < 1%b) 1% < p- value < 5%c) 5% < p- value < 10%d) p- value > 10%
What is transition matrix? How you can use matrix multiplication to estimate conditional PD?
How transition matrix can be used to predict default risk at different horizon?
What is the difference between one- year average PD and CPD?
How you can obtain marginal PD from CPD?
If CPD for BBB- rated borrower in fifth year is 12% and in the fourth year is 10%, then the marginal PD is estimated in the fifth year.
How Transition Matrix can be used to monitor asset movement?
What is the difference between Conditional PD and CPD?
How inverse of matrix is important in risk estimation?
Suppose that the two assets in a hypothetical loan portfolio have an identical credit risk grade, and hence, same probability of default(PD) = 2.16%. However, the assets are from two different
Assume that an FI holds two loans with the following return and risk characteristics:a) Estimate the return and risk on loan 1b) Estimate the return and risk on loan 2c) Estimate the return and risk
Why correlation analysis is important for a risk manager?If the JDP between asset X and asset Y is 0.0085% and PD of asset X is 0.80% and PD of asset Y is 0.25%, the default correlation between two
If the JDP between two borrowers A and B is lower than the product of their respective individual default probabilities, the default correlation between them would bea) Zerob) Negativec) Positived)
Is there any correlation between credit risk and market risk? Why there will be any correlation?
Which correlation is higher? Between credit risk and operational risk or between credit risk and market risk?
How correlation can be measured? How does it contribute to portfolio management?
How risk aggregation can be done on an integrated basis?
Which unexpected loss (UL) is highest amongst the following scenarios?a) PD volatile and LGD constantb) LGD volatile and PD constantc) Both PD and LGD are constantd) Both PD and LGD are volatile
The lower the default correlation in a credit portfolio,a) The Lower the unexpected loss will be.b) The higher the expected loss will be.c) The higher the unexpected loss will be.d) The lower the
If we estimate a regression and find: E(Y/ X) = 0.37 + 0.82X, a 1% change in X (say default rates) is expected to lead to what percentage change in Y (say LGD). Given X = 4%, what will be the value
Using regression analysis on historical loan losses, a bank has estimated the following:XC = 0.002 + 0.8 XL, and XH = 0.003 + 1.8 XLwhere XC = loss rate in the commercial sector, XH = loss rate in
Do you think multiple regression is better than two- variable regression?Why?
Is it true that as the variance of Y (dependent) variable explained by the X (independent) variable becomes increasingly larger relative to the unexplained variance, the R- square value will be
Is it true or false that if the error term is correlated with the regressors (predictor variables), the regression coefficient would be unbiased?
Is it a true statement that an increasingly large F value will be evidence in favour of rejecting the null hypothesis that the two (or more) explanatory variables have no effect on the dependent
Do you think that if a regression model suffers from multicollinearity problem, the R2 value may be high but regressor coefficients may be in significant? Give arguments.
Why panel regression should be used in risk modelling?
What is the basic difference between fixed effect model vs. random effect regression?
What is Hausman test? What it detects?
What is the basic difference between linear regression and logistic regression?
How logit model can be used to predict default risk?
Explain the use of multivariate regression in operational risk management?
What is unboundedness problem? How it can be solved?
What is maximum likelihood estimation (MLE)? Explain its application in risk management.
How MDA is run and what are the key test statistics?
In MDA analysis run in SPSS, if between group sum of squares =190 and within groups sum of squares = 184 and degrees of freedom are respectively 1 (between groups) and 50 (within groups), the
A researcher is investigating the key factors that determine the likelihood of loan payment default for retail loans. A logistic regression exercise has been carried out on 1500 borrower data in
In MDA analysis, the equality of variance– covariance matrices in the groups is tested througha) Mahalanobis’s Db) Box’s Mc) Wilk’s Lambdad) Baye’s probability
In a logistic regression result, the obtained LL(α, β) = −100 and LL(α) = −200; the obtained McFadden’s Pseudo R- square would be:a) 50%b) 75%c) 100%d) >100%
What is VaR? Why this technique is important?
How VCVaR is computed?
What are the simulation approaches?
What is the difference between loss frequency and loss scenario?
How credit VaR differs from market VaR?
How operational VaR analysis is different from market VaR?
What is loss convolution? How it can be done?
What is the role of VaR- based limits in managing risk?
Why MCS is better than HS?
What is the difference between loss variance and VaR?
Is there any difference between market risk VaR and operational risk VaR?
How VaR limits can be set?
Why the normal probability distribution not necessarily a good choice for predicting severity of losses? Under what circumstances would you envisage using the normal distribution? Now check the
How we can run MCS from after identifying the loss distribution?
What is the difference between P- P plot and Q- Q plot? How it helps the risk manager?
What is model validation? Why it is important in Banks?
What is Hosmer– Lemeshow Test? How it can be used in risk model validation?
What is the difference between AIC and BIC?

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