Risk Latte - Interview Questions # 9: Quantitative Modelling and Analytics

Interview Questions # 9: Quantitative Modelling and Analytics

Team Latte
Nov 07, 2007


  1. If is the characteristic function for where S is the stock price such that , where and is the probability density function for K, then the expression for risk neutral probability that a call option finishes in the money :

    1. None of the above


  2. One of the most widely used generalized quadratic functions to model implied volatility as a function of moneyness, K and maturity, T is:

    1. None of the above


  3. The chief advantage of Heston (1993) stochastic volatility model is/are:

    1. It yields a closed form solution and can take into account the correlation between asset price and asset volatility;
    2. It models the variance in a GARCH framework;
    3. It yields a closed form solution and models variance in a GARCH framework;
    4. It can model the autocorrelation of the asset returns;


  4. If S is the asset price and B is the barrier, then in an adaptive mesh model (using trinomial tree) to price barrier options, the price increments are given by:



  5. If the determinant of a correlation matrix is a negative number then the correlation matrix is nonsensical because:

    1. All eigenvalues of the correlation matrix are negative;
    2. the Cholesky matrix for the correlation matrix does not exist;
    3. the correlation matrix cannot be inverted;
    4. the correlation matrix is singular;


  6.  

    Answers:

    1 (b)
    2 (b)
    3 (a)
    4 (d)
    5 (b)


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