ML4T Final Practice Questions
Suppose you use a butterfly strategy: buy a 105 call at 7.16 and a 115 call at 0.53, write two 110 calls at 2.73. What is the break-even price of the strategy? A) 107.23 B) 107.76 C) 110 D) 110.53
A) 107.23
Given 2 companies have same Information Ratio Company A has algorithm 100 time smarter than Company B Company A trades for 20 days a year How many trades does company B need to execute? A) 200000 B) 20000 C) 2000000 D) 2000
A) 200000
When thinking about trading stocks as a Reinforcement Learning problem. Which choice is defined as an action? A) Buy B) Holding Long C) Daily Returns D) Bollinger Value
A) Buy
Which of the following is an issue when we buy or sell stocks with most significant price changes? A) Certainty of price change B) Determining an entry position C) Both A and B D) None of the above
A) Certainty of price change
Which of the following statements related to Efficient Market Hypothesis is NOT TRUE? A) EMH assumes that agents are rational and people do NOT overreact or underreact when faced with new information. B) Semi-strong-form efficiency implies that neither fundamental analysis nor technical analysis techniques will be able to reliably produce excess returns C) Weak form of the EMH leaves room for Fundamental Analysis. D) In P/E ratio vs Return% dataset graph, The correlation between Price-Earnings ratio, 20-year annualized returns could be used to refute the efficient market hypothesis.
A) EMH assumes that agents are rational and people do NOT overreact or underreact when faced with new information.
To assess weights for portfolio that minimizes risk using Mean Variance Optimization technique, what are the inputs required? A) Expected Return, Volatility, Covariance, Target return B) Expected Return, Volatility, Standard Deviation, Target return C) Momentum, Volatility, Standard Deviation, Mean D) Bollinger bands, Volatility, Standard Deviation, Target return
A) Expected Return, Volatility, Covariance, Target return
Which of the following can be inferred by the weak form of the Efficient Market Hypothesis? A) Future prices of AAPL cannot be predicted by analyzing historical prices. B) Prices of AAPL will adjust rapidly to any new information about the company. C) Prices of AAPL reflect all knowledge about the company, public and private. D) Future prices for AAPL can be predicted accurately by analyzing historic prices.
A) Future prices of AAPL cannot be predicted by analyzing historical prices.
According to the movie "The Big Short", which of the following is closest in meaning to a "Credit Default Swap (CDS)"? A) Going short on the default of mortgage-backed securities B) Going long on the default of mortgage-backed securities C) Collateralized Debt Obligation (CDO)
A) Going short on the default of mortgage-backed securities
Which statement is true regarding the Fundamental Law of Portfolio Management? A) IR = IC * sqrt(BR) B) IC = IR * sqrt(BR) C) BR = IC * IR D) IR = IC + sqrt(BR)
A) IR = IC * sqrt(BR)
Key method to measure the performance of a portfolio manager is: A) Information Ratio B) Compound Annual Growth Rate C) Information Coefficient D) Specific Risk
A) Information Ratio
In the movie "The Big Short", what did Credit Default Swaps do? A) Insured the bonds against failure and the insurer paid the claim if the underlying bonds fail B) Insured the bonds against failure and the insurer paid the claim if the underlying bonds make money C) To increase employees D) As an annual practice
A) Insured the bonds against failure and the insurer paid the claim if the underlying bonds fail
Which of the following is true for trading with Bollinger Bands? A) Large breakouts often occur after periods of low volatility when the bands contract. B) No breakouts usually occur after periods of low volatility when the bands contract. C) Bearish breakouts often occur after periods of low volatility when the bands contract. D) Bullish breakouts often occur after periods of low volatility when the bands contract.
A) Large breakouts often occur after periods of low volatility when the bands contract.
Which of the following did Mark Baum (owner of Front Point Partners) do in the movie? A) Open up to his wife about his brother B) Sell his swaps when Venett could not convince him to buy more C) Discover that the rating agencies would correct the ratings for subprime mortgages D) Meet with an acquaintance from Moody's
A) Open up to his wife about his brother
Jared Vennett sells the 'Credit Default Swaps' . What does Mark Baum use it for? A) Short the market. B) Buy the same credit swaps again. C) Buy half the credit swaps. D) Long the market.
A) Short the market.
If you believe in the weak form version of the Efficient Market Hypothesis, which of the following would you NOT be likely to consider valuable information? A) Stock volatility over the last month B) Insider knowledge of an impending CEO change C) The book value of the company D) Earnings report contents
A) Stock volatility over the last month
Which version of the Efficient Market Hypothesis suggests that insider trading cannot be possible? A) Strong B) Semi-strong C) Weak D) All of the above
A) Strong
According to the movie, what happened in the second quarter of '07 that caused mortgage defaults to skyrocket? A) The adjustable rates on the mortgages kicked in B) The Federal Reserve raised interest rates C) Banks began issuing synthetic CDOs D) Lehman Brothers and Bear Stearns collapsed
A) The adjustable rates on the mortgages kicked in
The goals of unsupervised learning and reinforcement learning are: A) The goal of unsupervised learning is to find similarities and differences between data points; the goal of reinforcement learning is to find a suitable action model to maximize cumulative reward; B) The goal of unsupervised learning is to find a suitable action model to maximize cumulative reward; the goal of reinforcement learning is to find similarities and differences between data points; C) The goal of both unsupervised learning and reinforcement learning is to find similarities and differences between data
A) The goal of unsupervised learning is to find similarities and differences between data points; the goal of reinforcement learning is to find a suitable action model to maximize cumulative reward;
If a stock is said to have good relative strength, it means: A) The ratio of the price of the stock to a given market index has trended upwards B) The recent trading volume of the stock has exceeded its average trading volume C) The stock has performed well compared with other stocks in the same risk category as measured by beta D) The total return of the stock has exceeded the total return on other stocks in the same industry
A) The ratio of the price of the stock to a given market index has trended upwards
Which of the following methods is NOT a valid way of solving a reinforcement learning problem? A) Transition Iteration B) Value Iteration C) Q-Learning D) Policy Iteration
A) Transition Iteration
Do you think that a market that is semi-strong efficient is also weak form efficient? Why or Why not? A) Yes it does, because semi-strong EMH states that the prices adjust immediately to all publicly available information, which also includes the asset's price history and vol data. B) No it does not, because semi-strong EMH talks only about fundamental data such as the company's earnings. C) Yes it does, because semi-strong EMH states that the prices adjust immediately to all publicly and privately available information. D) No it does not, as semi-strong EMH talks about information that is mutually exclusive to weak form EMH.
A) Yes it does, because semi-strong EMH states that the prices adjust immediately to all publicly available information, which also includes the asset's price history and vol data.
Which option below correctly describes the advantage of options? A) You cannot lose more than the premium. B) You can always get the premium back. C) Options do not have expiration dates. D) You can hold options for infinite amount of time.
A) You cannot lose more than the premium.
What is the root cause of 2008 financial crisis? A) hedge fund trading with derivatives B) increase in mortgage interest rate C) increase in oil price D) decrease in unemployment rate
A) hedge fund trading with derivatives
In order to reduce risk while maximizing returns, portfolios often allocate stocks based upon _____ correlation in the short term and _____ correlation in the long term. A) negative, positive B) zero, positive C) positive, positive D) zero, zero
A) negative, positive
Suppose you purchase a call option for a single stock (assume that you can do so) for $10 on a day where the stock price is $7 under the strike price. Starting from then, the price rises monotonically through the expiration date, on which the price of the stock is $3 above the strike price. What is the maximum net profit that you can make during this time period, assuming your only choices are to either exercise or not exercise the option? A) -$10 B) -$7 C) -$3 D) $3
B) -$7
According to Bloomberg News, what opportunity similar to CDO which several large banks have started selling since 2015? A) Collateralized Mortgage Obligation B) Bespoke Tranche Opportunity C) Asset-Backed Security D) Synthetic CDO
B) Bespoke Tranche Opportunity
What does CDS stand for? A) Collateralized Debt Swap B) Credit Default Swap C) Collateralized Debt Security D) Credit Default Security
B) Credit Default Swap
Which of these could represent a State in a Reinforcement Learning problem when referring to a trading scenario? A) BUY B) Daily Return C) Return from Trade D) All of the above
B) Daily Return
Which of the following hypotheses hold under Efficient Market Hypothesis? A) EMH implies that it is impossible to predict perfectly future returns B) EMH implies that prices must incorporate all existing information C) EMH implies that prices vary with no clear reason D) EMH implies that prices do not fluctuate
B) EMH implies that prices must incorporate all existing information
Following statement is true or false: Hedge Funds cannot succeed if EMH applies. A) True B) False
B) False
In an actively managed portfolio, what strategy may help you improve breadth? A) Increase your information ratio B) Finding additional stocks and markets C) Increase your information coefficients D) Trade ETFs only
B) Finding additional stocks and markets
Who was the first bank Michael approached to make him the CDSs? A) JP Morgan B) Goldman Sachs C) Deutsche Bank D) Bank of America
B) Goldman Sachs
Which of the following are states in a trading reinforcement learning problem? (Looking for an S) A) Buying B) Holding Long C) Leverage D) Cumulative Return
B) Holding Long
According to the Fundamental Law, which of the following statements is most accurate? A) Increasing skill and/or breadth will increase performance, but it's more difficult to increase breadth than skill, and increasing skill isn't as effective as increasing breadth. B) Increasing skill and/or breadth will increase performance, but it's more difficult to increase skill than breadth, and increasing breadth isn't as effective as increasing skill. C) Utilizing machine learning will increase performance. D) A Georgia Tech education including CS7646 coursework will increase performance.
B) Increasing skill and/or breadth will increase performance, but it's more difficult to increase skill than breadth, and increasing breadth isn't as effective as increasing skill.
Which of these metrics are not used in the Bollinger Band calculation introduced in lecture? A) Standard Deviation B) Momentum C) Simple Moving Average D) Price
B) Momentum
Is Bollinger Bands a leading indicator? A) Yes B) No, Bollinger Bands is a lagging indicator C) No, Bollinger Bands is not an indicator D) No, Bollinger bands is neither a leading or a lagging indicator
B) No, Bollinger Bands is a lagging indicator
Given that EMH is about 3 forms, weak, semi-strong, and strong. What would be the behavior of prices, if, for example, the standard investor became one that only bought and held stocks passively? A) There would be no change in the way that prices adjusted B) Prices will fail eventually to show any type of new information. There will be incentives to trade more C) Prices will continue to change based on new information that won't cease to enter the market D) We would probably enter another recession
B) Prices will fail eventually to show any type of new information. There will be incentives to trade more
What is the correct sequence for the cycle describing the RL problem? A) Analyze, Remember, Act B) Sense, Think, Act C) Think, Sense, Act D) Remember, Act, Analyze,
B) Sense, Think, Act
For Grinold's Fundamental Law, what is Information Ratio (performance) similar to? A) Volatility B) Sharpe Ratio C) Cumulative Return D) Daily Return
B) Sharpe Ratio
In the movie "The Big Short ", hedge fund manager Michael Burry discovers that the United States housing market is extremely unstable. Therefore, he decides to take a short position against the United States housing market. Which option is correct about shorting? A) You always win money when taking short position. B) Short sellers borrow shares of stock that they do not own and sell those shares at the current market price. C) Short sellers sell shares of stock that they own and sell those shares at the current market price. D) Short sellers borrow shares of stock that they do not own and sell those shares at the lower current market price.
B) Short sellers borrow shares of stock that they do not own and sell those shares at the current market price.
Which of the following are not assumptions of the Efficient Markets Hypothesis? A) New Information arrives randomly B) Small number of investors C) Prices adjust quickly D) Prices reflect all available information
B) Small number of investors
It is currently debatable whether the stock market is efficient or not (if the efficient market hypothesis is correct). How do you expect this to change in the future? A) New investors enter the market every day, I expect market efficiency to decline in the future, as there will be more noise in the market. B) Sophisticated investors and institutions still rely heavily on human decision making. I expect market efficiency to increase in the future. As more institutions adopt computer-automated and systematic trading systems, a fair-market price equilibrium should be reached in shorter time. C) The stock market is perfectly efficient, and it will remain that way. D) The stock market is entirely inefficient, and will remain that way.
B) Sophisticated investors and institutions still rely heavily on human decision making. I expect market efficiency to increase in the future. As more institutions adopt computer-automated and systematic trading systems, a fair-market price equilibrium should be reached in shorter time.
Which stock properties would best be considered to comprise an optimal portfolio with higher combined returns and lower risk than either of the individual stocks. A) Stocks ABC and DEF with covariance value of +0.9. B) Stocks ABC and DEF with covariance value of -0.9. C) Stocks ABC and DEF with combined Sharpe Ratio of 1.0. D) Stocks ABC and DEF with combined Sharpe Ratio of 0.0.
B) Stocks ABC and DEF with covariance value of -0.9.
Say DIS stock is currently trading at $50 per share. Now we purchase one call option contract (100 shares) on DIS with a $70 strike and at a price of $5.00 per contract. Please select the correct description below: A) In the U.S. We can only exercise the option on the expiration date B) The cost of buying the option is $500 C) If we exercise the option when the stock price is $70, the actual profit will be $2000 D) We will make a profit if exercise the option when the stock price goes up to $60
B) The cost of buying the option is $500
Please select the statement that is True: A) In Markov decision tree process the reward from applying action to the current state depends on the previous states and previous actions that were taken by the agent B) The end goal of the Markov decision problem is to find a policy that maximizes total rewards C) Agent can only receive one type of a reward at a time: either an immediate reward or a discounted future reward D) Transition function maps sets of actions into sets of rewards
B) The end goal of the Markov decision problem is to find a policy that maximizes total rewards
What is considered a major benefit of exchange-traded stock options? A) The premium can be refunded at any time before the expiration date B) The loss is capped to the premium
B) The loss is capped to the premium
If two portfolio managers have the same investment skills, which one you would prefer? A) The one who works in a famous company of the world's top 500, but with limited invest opportunities. B) The one who works in a very small company, but have many opportunities to invest C) Both are good candidates due to the same investment skills D) Above answers are wrong due to the lack of further information
B) The one who works in a very small company, but have many opportunities to invest
Which of the following is true about Markov Chain problems ? A) The sum of all the next states in reward function is 1. B) The sum of the all the next states in transition function is 1. C) The sum of all the next states in set S is 1. D) The sum of all the next action in set A is 1.
B) The sum of the all the next states in transition function is 1.
What is the reason that the main characters in "The Big Short" decide in credit default swaps? A) They all read a paper that predicted the possible stock market crash. B) They all noticed that the housing loan market was inflated with high risk loans being structured into loan packages with a AAA rating (low risk rating) C) They all noticed that the housing loan market was inflated with medium risk loans being structured into high risk loan packages like BB to CCC. D) They all got tipped off by the SMA for housing loan market predicting a change in the trend.
B) They all noticed that the housing loan market was inflated with high risk loans being structured into loan packages with a AAA rating (low risk rating)
You are using Dyna-Q to learn a policy to help with trading a new mutual fund. You only have a few days to trade before you need to cash out for other reasons. To model this time constraint do you: A) Use a high alpha (learning rate) so that you learn your policy quickly. B) Use a low lambda (discount rate) because you value later rewards less. C) Use fewer hallucination cycles so that you have more time to trade. D) Use a smaller set of training data to mimic the small time frame you will have to trade.
B) Use a low lambda (discount rate) because you value later rewards less.
Fill in the blank. Transition function is a three dimensional object given by T[s,a,s']. Suppose we are in state "s" and take particular action "a" then the sum of all the next states "s'(s prime)" we might end up in should sum to be __. A) always 0 B) always 1 C) either 0 or 1 D) always more than 1
B) always 1
Stock options can increase the ___________ of a portfolio, as the investor can keep more cash on hand up to the expiration date. A) value B) leverage C) riskiness D) stability
B) leverage
When 2 FrontPoint traders, Danny and Porter travel to Miami to investigate current housing development, they learn... A) there are several large families living in the same house. B) most homeowners have defaulted on their mortgages and have moved out. C) landlords in these areas are keeping up with their mortgage payments. D) they need to long the housing market.
B) most homeowners have defaulted on their mortgages and have moved out.
The current market price of XYZ is $ per share. An investor plan to purchase 1 XYZ 50 calls with $2 premium per share and 1 XYZ 50 puts with $2 premium per share. What is the breakeven points of this purchase: A) 46 and 52 B) 48 and 54 C) 46 and 54 D) 48 and 52
C) 46 and 54
Assume you bought 100 buy option calls at $110 strike price of AAPL stock, which takes $300 as the premium. The stock price moved from $115 to $120. What is the maximum return available? A) 10000 B) 300 C) 9700 D) none of above
C) 9700
What is the meaning of "synthetic CDO" in "the big short" movie? A) A CDO that contains subprime mortgages B) A CDO that contains student loan C) A CDO that contains credit default swaps D) A CDO that contains corporate debt
C) A CDO that contains credit default swaps
The goal of reinforcement learning is to find the optimal policy. What are possible outputs of a policy function? A) A single action that should be taken next when in a particular state B) A probability distribution over a set of actions C) A and B D) None of the above
C) A and B
Which of the below statements is most correct about Dyna? A) Dyna utilizes a model-free based method. B) Dyna utilizes a model-based method. C) A and B. D) None of the above.
C) A and B.
Which of these scenarios does not indicate an upward trend in stock price: A) A particular stock's price surpasses the upper Bollinger Band B) A particular stock's 20-day SMA surpasses its 100-day SMA C) A particular stock's short-term EMA falls below its long-term EMA D) The value of a particular stock's Bollinger Band Percentage > 0.8 and its price/SMA ratio is >= 1
C) A particular stock's short-term EMA falls below its long-term EMA
Which statements is FALSE about "The Big Short"? A) A Collateralized debt obligation (CDO) can be made up of different types of assets and loans. B) Many Mortgage-Backed Securities (MBS) are also Collateralized debt obligations (CDOs). C) AAA tranches have higher risks than BBB tranches. D) Michael Burry made profits by purchasing Credit default swaps (CDS) from the banks and these banks paid him the full amount of the bond when the Mortgage-Backed Security (MBS) defaulted.
C) AAA tranches have higher risks than BBB tranches.
In the movie The Big Short, what does finally convince Mark Baum to start buying credit default swaps on mortgages? A) When Jared Vennet explained the problem using a Jenga tower B) After talking to Michael Burry over his findings on Mortgage bonds C) After investigating neighborhoods and people getting multiple mortgages D) When he talked to rating agencies about how they rated CDOs
C) After investigating neighborhoods and people getting multiple mortgages
In the movie, The Big Short, characters in the film, such as Michael Burry, would acquire ________ in order to short the MBS(Mortgage Backed Securities) which means betting against the housing market. A) Synthetic CDO B) CDO Squared C) Credit Default Swaps D) Sub-prime mortgages
C) Credit Default Swaps
Which of the following is NOT an example of a state (s) in reinforcement learning? A) Holding Long B) Momentum Value C) Daily Returns D) Holding short
C) Daily Returns ????????
What is NOT correct regarding the Q-learning update rule? A) Alpha is learning rate, indicating the dependence of the new Q-value on the old one. B) We need to find the action that maximize the Q-value among all possible actions when calculating new Q-value. C) Discount and immediate reward of both past and future actions should be considered when calculating new Q-value. D) The discount factor is used to reduce the value of future rewards
C) Discount and immediate reward of both past and future actions should be considered when calculating new Q-value.
Which of the following statements about Dyna is true? A) Dyna is a model-free based method. B) Dyna is the basis for Q-Learning. C) Dyna is a blend of model-free and model-based methods D) Dyna is more expensive than Q-Learning
C) Dyna is a blend of model-free and model-based methods
Increase in SMA(Simple Moving Average) over a period of time indicates: A) Increase in volatility of the stock for the time period B) Decrease in Stock price for the time period C) Increase in the Stock price for the time period D) No Change in stock price
C) Increase in the Stock price for the time period
What does the housing crisis suggest about the Efficient Market Hypothesis? A) It corroborates the EMH because certain hedge funds were able to short the housing market using data collected from mortgage data. B) Market bubbles don't exist. The Economy is perfect. Everything is always fine. C) It contradicts the EMH because information relevant to the crash was not reflected in housing market share prices. D) It corroborates the EMH because the crash could have been easily predicted from the available stock price information.
C) It contradicts the EMH because information relevant to the crash was not reflected in housing market share prices.
About Q-learning, which statement is wrong? A) Q-learning is a reinforcement learning technique used in machine learning. B) The goal of Q-learning is to learn a policy. C) It is designed to make future rewards worth more than immediate rewards. D) State and action are two key elements in Q-learning.
C) It is designed to make future rewards worth more than immediate rewards.
Which of the following is not the keys of Grinold's fundamental law? A) Skill B) Performance C) Luck D) Breadth
C) Luck
What is the best way an investor who is lacking in skill can beat a more skillful investor? A) Hire skillful people B) Make smarter trades C) Make more trades per day D) Pick better stocks
C) Make more trades per day
Technical Analysis is most effective for... A) Making complex trading decisions B) Analyzing cash flow and book value C) Making simple trading decisions D) Making long-term trading decisions
C) Making simple trading decisions
Identify the FALSE statement about the components that make up a Markov Decision Problem. A) States - a finite set of states that the process can occupy at a current time B) Actions - a finite set of actions that can be enacted given a state C) Observations - events observed that are by-products of the current state of the process D) Rewards - the motivation given for transitioning from the current state to the next state
C) Observations - events observed that are by-products of the current state of the process
What has the lowest risk ? A) Stocks B) Bonds C) Stocks and Bonds D) Precious Materials
C) Stocks and Bonds
The goal for reinforcement learning is to find a Policy PI that maps a state to an action that we should take and its goal is to find this pi such that it maximizes some future sum of the reward. Which of the following is the way that we calculate discount reward? Suppose n is a finite number, 0 < lambda < 1, and r_i is the reward for the ith action. A) Sum_{i=1}^{Inf} r_i B) Sum_{i=1}^{n} r_i C) Sum_{i=1}^{Inf} lambda^{i-1} r_i D) Sum_{i=1}^{n} lambda^{i-1} r_i
C) Sum_{i=1}^{Inf} lambda^{i-1} r_i
If the Information Coefficient is doubled and the trading opportunities are multiplied by 9, what happens to the Information Ratio. A) The Information Ratio is multiplied by 1 (remains unchanged) B) The Information Ratio is multiplied by 4.5 C) The Information Ratio is multiplied by 6 D) The Information Ratio is multiplied by 18
C) The Information Ratio is multiplied by 6
How will information ratio change if adding additional cash to the portfolio? A) No effect. B) The information ratio will increase. C) The information ratio will decrease. D) The effect depends on market conditions.
C) The information ratio will decrease.
Suppose your best friends is a CEO of a company, and you could always acquire the latest inside information of this company. But one day you find that you could NOT use this advantage to make profits. Which of the following statements about the efficient market hypothesis (EMH) is supported by your experience? A) The weak version of EMH is valid. B) The semi-strong version of EMH is valid. C) The strong version of EMH is valid. D) None of above
C) The strong version of EMH is valid.
Why is a good idea to create a portfolio that combines assets with negative correlations? A) To get more "alpha" than any individual asset B) To maximize returns by shorting stocks C) To reduce portfolio volatility D) To balance weights equally among all assets
C) To reduce portfolio volatility
What problem would be most effectively addressed by reinforcement learning? A) Forecasting the weather by analyzing instantaneous measurements B) Scoring wine based on graded taste features C) Using sensors to navigate an environment D) Recognizing a song after sampling a small portion of it
C) Using sensors to navigate an environment
What is TRUE about the efficient frontier A) The efficient frontier was introduced by William F. Sharpe, who also developed the Sharpe ratio method for calculating riskadjusted return B) You can find portfolios not on the efficient frontier that have a higher return for the same amount of risk C) You can find portfolios not on the efficient frontier that have higher risk for the same amount of return D) Assuming none of the asset is risk-free, as the expected return decreases, the risk value of the efficient frontier will keep decreasing
C) You can find portfolios not on the efficient frontier that have higher risk for the same amount of return
In terms of the fundamental law, when aiming for high performance, you can make up for low skill with ___. A) low breadth B) low sharpe ratio C) high breadth D) high volatility
C) high breadth
Which of the following are characteristics of technical analysis? i. price of stock ii. value of a company iii. volume of stock traded A) i only B) i and ii C) i and iii D) i, ii, and iii
C) i and iii
The lowest possible Sharpe ratio of a portfolio that contains at least two stocks is: A) higher than the lowest Sharpe ratio of any one stock in the portfolio B) equal to the lowest Sharpe ratio of any one stock in the portfolio C) lower than the lowest Sharpe ratio of any one stock in the portfolio D) none of the above
C) lower than the lowest Sharpe ratio of any one stock in the portfolio
The discount factor allows us to value: A) Helps to achieve maximum returns over long term B) long-term reward more than short term reward C) short-term reward more than long-term ones D) None of the above
C) short-term reward more than long-term ones
Stock A and stock B each gives a 12% annual return. Daily returns standard deviation of stock A is 0.0027 and stock B is 0.0031. If you have $100 which one of below 4 option s would be the best investment strategy to invest the $100? A) $55 in Stock A, $45 in Stock B B) $100 in Stock B C) $45 in Stock A, $55 in Stock B D) $100 in Stock A
D) $100 in Stock A
Why did it become a good investment to bet against mortgage-backed securities. A) The default rate on the mortgages kept rising. B) Rating agencies were accurately assigning ratings. C) Banks were incentivized to issue more and more mortgages. D) A and C
D) A and C
Which celebrity chef and "Kitchen Confidential" author explains collateralized debt obligations (CDOs) by comparing them to fish stew? A) Gordon Ramsay B) Mario Batali C) Thomas Keller D) Anthony Bourdain
D) Anthony Bourdain
The Fundamental Law of Portfolio management states which of the following: A) Portfolio performance increases as skill increases B) Portfolio performance increases as trading opportunities increases C) High portfolio performance can only be guaranteed through diversification D) Both (A) and (B)
D) Both (A) and (B)
85: Which one of the following statements is NOT correct? A) Stock options are sold by one party to another. B) The option buyer has the right to buy or sell a stock at a specific price. C) Stock options will expire if the buyers don't exercised. D) Both American options and European options can be exercised any time before the expiration date
D) Both American options and European options can be exercised any time before the expiration date
Which of the following can not improve your performance based on the Fundamental Law? A) Improve your skill B) Increase the Breadth C) Increase the IC and BR D) Decrease breadth but improve the skill
D) Decrease breadth but improve the skill
Reinforcement learning algorithms try to: A) Find a policy pi that minimizes Transition function. B) Find a policy pi that minimizes Reward function. C) Find a policy pi that maximizes Transition function. D) Find a policy pi that maximizes Reward function.
D) Find a policy pi that maximizes Reward function.
What should you do when the stock hits the bottom Bollinger Band? A) Hold your position (don't change your position at all) B) Exit any position you currently have and then hold at 0 shares C) Short the stock to have negative shares D) Long the stock to have positive shares
D) Long the stock to have positive shares
According to EMH, what type of analysis/analyses could provide excess returns for the semi-strong form? A) Technical Analysis B) Fundamental Analysis C) A and B D) Neither A or B
D) Neither A or B
What is Information Ratio? A) Sharpe Ratio of the Portfolio B) Mean of the excess return C) Market return plus excess return D) Sharpe Ratio of the excess return
D) Sharpe Ratio of the excess return
84: Which of the following is a not assumed as part of the Efficient Markets Hypothesis? A) The current price reflects all available information and quickly adjusts based on demand B) There are a large number of investors competing for gains C) New information arrives constantly arrives and randomly D) The current price reflects all available information and slowly adjusts based on demand
D) The current price reflects all available information and slowly adjusts based on demand
Which of the following choices is not an assumption made by the Efficient Market Hypothesis? A) There are a large number of investors B) Prices adjust quickly C) Prices reflect all available information D) The market can be beaten by efficient trading practices
D) The market can be beaten by efficient trading practices
Which of the following is not part of the Markov decision problems: A) Set of states S B) Set of actions A C) Transition function D) Value function
D) Value function
In Reinforcement Learning, the default MDP has an assumption of infinite horizons to overcome that, we introduce a concept of ___________ rewards. Multiplying the reward by λ raised to t. Where λ's limits are ___< λ <=___. A) [reduced , -1, 1] B) [reduced, 0 , 1] C) [discounted, -1, 1] D) [discounted, 0 , 1]
D) [discounted, 0 , 1]
Which of the following attribute of Q learning is important in convergence over infinite horizon? A) rar B) radr C) alpha D) gamma
D) gamma
Assume beta represents the market return and alpha represents the residual return. Which answer below exactly contains the factors that Information Ratio is related to? A) std(beta), std(alpha), mean(alpha) B) mean(beta), std(beta), std(alpha) C) mean(beta), std(beta) D) mean(alpha), std(alpha)
D) mean(alpha), std(alpha)
