University Of Central Arkansas Operations And Supply Chain Management Assignment Help - properly classifies
Question - Which of the options below properly classifies each model risk error into a model risk category?
Â· Risk 1: Failure to consider a sufficient number of trials in a Monte Carlo simulation.
Â· Risk 2: Use of the mid-quote price rather than the bid price to value long positions in financial
Â· Risk 3: Failure to fully account for time-variation of volatility.
Model Risk Categorization
ï‚· Implementation risk
ï‚· Incorrect model calibration
ï‚· Incorrect model application
a. Risk 1 = incorrect model calibration, Risk 2 = Implementation risk, Risk 3 = incorrect model
b. Risk 1 = Implementation risk, Risk 2 = incorrect model application, Risk 3 = Incorrect model
c. Ri ...Read More
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