Which of the Following Is a Method That May Overcome

question 51

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.

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Definitions:

Market Equilibrium

The state in which the supply of an item matches its demand, resulting in a stable price for the item.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage.

Equilibrium Interest Rate

The interest rate at which the quantity of money demanded equals the quantity of money supplied, balancing savings and investment.

Loanable Funds

The funds available for borrowing in the financial markets, influenced by savings, government policies, and financial institutions' lending criteria.