Quiz 3

Question 1

CAS 200

Question 2

Why was the US assumption for the recession being a one time event? Why was he wrong

Answer 2

His theory was based on regression of the mean - saying this is a once in a lifetime and it won’t happen again
Wrong because the assumptions of the normal distribution do not hold in real life - it should actually be a thick-tailed distribution.

Question 3

What interview skills do you need when interviewing a controller?

Answer 3

1. Unbiased (neutral)
2. Have professional skepticism

Tversky and Kaneman

Question 4

What is the problem with normal distributions?

Answer 4

the assumptions do not hold in real life and it should be a thick tailed or fat tailed distribution instead

Question 5

What is the markowitz portfolio theory of 1952

Answer 5

some risk can be reduced through diversification

people say 5 is enough but professor says 15 to 20 is sufficient

Question 6

Maximum liklihood estimation (MLE)

Answer 6

Technique for estimating parameters in any type of model

Question 7

Why did Nortel go bankrupt

Answer 7

Through industrial espionage its competitors managed to steal its technology secrets (biggest asset)