Used to estimate model parameters

Overfitting by testing many variations until one “works”

Asymmetry of a return distribution

The heaviness of distribution tails

The number of factors in a model

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Free CFA Portfolio Management Practice Questions & Answers

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Question 211

FX Cross‑Rate Return A USD investor buys a Japanese stock: - Local return = 10% - USD/JPY moves from 110 → 105 FX return = ?

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Question 212

Portfolio VaR with Three Assets Portfolio value = $200m Portfolio σ = 1.2% z(99%) = 2.33 VaR = ?

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Question 213

Incremental VaR (IVaR) Portfolio VaR = $10m New position VaR (standalone) = $3m Correlation with portfolio = 0.5 IVaR = ?

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Question 214

Expected Shortfall from Distribution Loss distribution tail: - 1% worst losses average –9% - 5% VaR = –5% ES(5%) = ?

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Question 215

A: E(R)=8%, σ=10% Asset B: E(R)=12%, σ=20% Correlation = 0.2 Risk‑free = 2% Weight in A in tangency portfolio is closest to:

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Question 216

Expected return = 11% σ = 14% Rf = 3% Sharpe = ?

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Question 217

Portfolio σ = 9% Asset weight = 30% MCR = 12% Risk contribution = ?

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Question 218

Weights σA = 15% σB = 10% Risk parity → wAσA = wBσB wA + wB = 1 wA = ?

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Question 219

Unhedged return = 12% Hedged return = 7% Hedge ratio = 60% Total return = ?

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Question 220

Multi‑Factor Expected Return Rf = 2% Factor premiums: Value=3%, Momentum=2% Exposures: bV=0.7, bM=1.4 Expected return = ?

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Question 221

Residual Risk Share Total variance = 0.0225 Residual variance = 0.004 Share = ?

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Question 222

Local return = 9% FX return = –2% Total return = ?

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Question 223

VaR Contribution of Asset Portfolio VaR = $12m Asset MVaR = 0.9 Asset weight = 25% Contribution = ?

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Question 224

Risky portfolio return = 10% Risk‑free = 3% Leverage = 150% (borrow 50% at Rf) Expected return = ?

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Question 225

Optimization — σ of Levered Portfolio Risky σ = 12% Leverage = 150% Portfolio σ = ?

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Question 226

Local return = 6% Spot = 1.50 Forward = 1.47 Forward premium = ?

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Question 227

What is a rolling‑window backtest?

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Question 228

In‑sample data is:

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Question 229

Out‑of‑sample data is:

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Question 230

Data snooping is:

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Question 231

Maximum drawdown measures:

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Question 232

An equal‑weight factor portfolio:

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Question 233

A risk‑parity factor portfolio aims to:

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Question 234

A covariance matrix represents:

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Question 235

Skewness measures:

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Question 236

Kurtosis measures:

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Question 237

Conditional VaR (CVaR) is:

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Question 238

Liquidity‑adjusted VaR accounts for:

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Question 239

Incremental VaR (IVaR) measures:

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Question 240

Component VaR (CVaR) is:

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Free CFA Portfolio Management Practice Questions & Answers

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