Which of the Following Is a Method That May Overcome

question 108

Multiple Choice

Which of the following is a method that may overcome weaknesses in the historic or back simulation model?

• A)The use of smaller sample sizes to estimate return distributions.
• B)Weight sample size observations so that the more recent observations contribute a larger amount to the model.
• C)Decrease the number of assets in the trading portfolio so that past returns will provide more accuracy to the model.
• D)Increase the number of assets in the trading portfolio in order to benefit from higher levels of diversification.
• E)The weaknesses in the model cannot be overcome.

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Definitions:

Sum

The outcome of summing two or more numbers.

Infinite Series

A sum of infinitely many terms following a specific pattern.

Binomial Coefficient

A numerical value that represents the number of ways in which k objects can be chosen from n objects without repetition and regardless of order.

Geometric Sequence

An ordered list of numbers where each term is multiplied by a constant factor to obtain the next term.