exam

Question 1

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

Answer 1

D

Question 2

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

Answer 2

C

Question 3

: 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

Answer 3

B

Question 4

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

Answer 4

D

Question 5

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

Answer 5

C

Question 6

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

Answer 6

C

Question 7

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)

Answer 7

A

Question 8

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

Answer 8

D

Question 9

What does CDS stand for?
A) Collateralized Debt Swap
B) Credit Default Swap
C) Collateralized Debt Security
D) Credit Default Security

Answer 9

B

Question 10

: Which of the following is not the keys of Grinold’s fundamental law?
A) Skill
B) Performance
C) Luck
D) Breadth

Answer 10

C

Question 11

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

Answer 11

C

Question 12

: 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

Answer 12

B

Question 13

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

Answer 13

D

Question 14

Following statement is true or false: Hedge Funds cannot succeed if EMH applies.
A) True
B) False

Answer 14

B

Question 15

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]

Answer 15

D

Question 16

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.

Answer 16

A

Question 17

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

Answer 17

B

Question 18

The goals of unsupervised learning and RL 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

Answer 18

A

Question 19

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.

Answer 19

B

Question 20

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

Answer 20

?

Question 21

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

Answer 21

C

Question 22

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

Answer 22

B

Question 23

Which of the following attribute of Q learning is important in convergence over infinite horizon?

A) rar
B) radr
C) alpha
D) gamma

Answer 23

D

Question 24

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.

Answer 24

A

Question 25

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

Answer 25

C

Question 26

What has the lowest risk for return ? A) Stocks B) Bonds C) Stocks and Bonds D) Precious Materials

Answer 26

C?

Question 27

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

Answer 27

A

Question 28

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 risk- adjusted 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

Answer 28

C?

Question 29

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.

Answer 29

A

Question 30

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

Answer 30

A

Question 31

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

Answer 31

B

Question 32

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

Answer 32

B

Question 33

: 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

Answer 33

A

Question 34

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.

Answer 34

B

Question 35

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

Answer 35

C

Question 36

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

Answer 36

B

Question 37

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

Answer 37

A

Question 38

For Grinold’s Fundamental Law, what is Information Ratio (performance) similar to? A) Volatility B) Sharpe Ratio C) Cumulative Return D) Daily Return

Answer 38

B

Question 39

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

Answer 39

A

Question 40

: 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.

Answer 40

A?

Question 41

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

Answer 41

D

Question 42

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.

Answer 42

??

Question 43

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)

Answer 43

D

Question 44

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,

Answer 44

B

Question 45

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

Answer 45

A value iteration or policy iteration - model based

Question 46

: 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

Answer 46

C

Question 47

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

Answer 47

B

Question 48

: 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.

Answer 48

B

Question 49

: 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

Answer 49

C

Question 50

Reinforcement learning algorithm tries to (select one that applies) 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.

Answer 50

D

Question 51

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

Answer 51

D

Question 52

: 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

Answer 52

C

Question 53

: 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

Answer 53

A

Question 54

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

Answer 54

D

Question 55

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

Answer 55

B

Question 56

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

Answer 56

A

Question 57

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

Answer 57

C

Question 58

Please select statements that are 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

Answer 58

B

Question 59

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

Answer 59

B

Question 60

The current market price of XYZ is $50 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

Answer 60

C since both the put and call cost $2/share and have the starting price of $50, if the price doesn't move, you earn nothing and lost $4/share for buying the call and put. If the price moves to $48, you broke even on the put but still lost the $2 for the call. Thus, the price needs to drop to $46 to cover the $4/share you paid for both options. Since the problem is symmetrical, The price could also rise to $54 in order for the call to cover the cost.

Question 61

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

Answer 61

A premium = 2*2.73 - 0.53-7.16 = -2.23 (per share)

Question 62

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

Answer 62

C

Question 63

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

Answer 63

A

Question 64

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

Answer 64

D

Question 65

Which of the following distinguishes a Model-Based Reinforcement Learning algorithm from a Model-Free algorithm? A) A Model-Based algorithm observes the transition of an environment from state S to state S’ B) A Model-Based algorithm uses randomness to explore the environment while a Model-Free algorithm does not. C) While a Model-Free algorithm does not attempt to create a model of the transition function of the environment ( T [S,A,S’], it does attempt to m摯汥琠敨爠睥牡?畦据楴湯⠠删嬠□嵁 楬敫愠䴠摯汥䈭獡摥愠杬牯瑩浨మ潂桴䄠愠摮䌠 挀档湥㍧㔰a䤀?慭歲瑥椠?数晲捥汴⁹晥楦楣湥ⱴ眠 D) Both A and C

Answer 65

model-based reinforcement learning, we look at the experience tuples over time and build a model of T and R by examining the transitions statistically. For example, for each state, action pair , we can look at the distributions of the observed next state and reward, respectively. Once we have these models, we can use value iteration or policy iteration to find the policy.

Question 66

If market is perfectly efficient, which of the followings will still be able to generate returns? A) High frequency traders B) Active portfolio managers C) Passive portfolio managers

Answer 66

d?

Question 67

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 informationarrives constantly arrives and randomly D) The current price reflects all available information and slowly adjusts based on demand

Answer 67

D

Question 68

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.

Answer 68

D

Question 69

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.

Answer 69

C

Question 70

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

Answer 70

A

Question 71

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

Answer 71

C

Question 72

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)

Answer 72

D

Question 73

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

Answer 73

C?

Question 74

: 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

Answer 74

B

Question 75

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.

Answer 75

C

Question 76

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

Answer 76

C

Question 77

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

Answer 77

C

Question 78

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.

Answer 78

A

Question 79

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

Answer 79

A

Question 80

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

Answer 80

C

Question 81

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

Answer 81

B

Question 82

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

Answer 82

B

Question 83

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

Answer 83

B

Question 84

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.

Answer 84

C

Question 85

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.

Answer 85

A

Question 86

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

Answer 86

D

Question 87

You have 30 candidate liquid driver symbols e.g. SPY, XLE, XLF etc. You believe there exists a linear relationship between those 30 liquid instruments' returns and an illiquid instrument's returns e.g. SNOW: r_SNOW = \Beta_SPY * r_SPY + \Beta_XLE * r_XLE + \Beta_XLF * r_XLF + \cdots. However, you believe the relationship is sparse i.e. most Betas are zero. Which of the following regression techniques would produce a sparse linear relationship? Hint: Think about how a penalty behaves when the Beta is small. A) Lasso Regression i.e. penalize the absolute value of each regressor's beta B) Ridge Regression i.e. penalize the square of each regressor's beta C) RANSAC i.e. fit a simple linear model from random subsets of

Question 88

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.

Answer 88

???

Question 89

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

Answer 89

C one option is 100 shares

Question 90

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.

Answer 90

C

Question 91

According to portfolio optimization and the efficient frontier, what is defined as "Risk"? A) Volatility between two stocks B) Standard deviation of historical daily returns C) Standard deviation of historical yearly returns D) When the total market cap of a company is higher than its book value, it is "risky"

Answer 91

B

Question 92

Which of the following statement about efficient market assumptions is FALSE? A) Prices are driven by small groups of wall street hedge funds with efficient algorithms. B) Price adjust quickly. C) New information arrives randomly and transparently. D) Neither technical nor fundamental analysis can produce risk- adjusted excess returns under efficient market assumptions.

Answer 92

A

Question 93

If the weak form of the EMH is correct then A) Technical analysis will be success (prediction the future price based on historical price and volume data) B) Technical analysis cannot succeed C) Fundamental analysis cannot work D) B and C

Answer 93

B

Question 94

What are the two components of taking action a in state s for Q[s, a]? A) maximum reward, minimum reward B) immediate reward, discounted reward C) long reward, short reward D) call reward, put reward

Answer 94

b

Question 95

What is the most important factor to make a less volatile portfolio for the combinations of several stocks? A) Average price of stocks B) Covariance of stocks C) Average daily return of stocks D) Standard deviation of daily return of stocks

Answer 95

B

Question 96

A portfolio can lie above the efficient frontier. A) Correct, the efficient frontier represents the highest risk portfolio for a given level of return. B) Correct, the efficient frontier represents the lowest risk portfolio for a given level of return. C) Incorrect, the efficient frontier represents the highest risk portfolio for a given level of return. D) Incorrect, the efficient frontier represents the lowest risk portfolio for a given level of return.

Answer 96

D

Question 97

Select one that has options on besides stocks: A) Commodities B) Insurance C) House

Answer 97

A

Question 98

Which one of the following sentences is true for the efficient market hypothesis? A) There are four forms of the EMH: weak, semi, semi-strong and strong B) If the EMH is correct then hedge fund managers cannot succeed C) Since all the hedge fund managers can identify similar opportunities they have to act on these ASAP. D) All of the above

Answer 98

C

Question 99

The assumption that prices will adjust rapidly to new public information represents which form of the Efficient Markets Hypothesis? A) Weak B) Semi-strong C) Strong D) Quick

Answer 99

B

Question 100

: What is risk? A) standard deviation of historical daily return B) covariance of historical daily return C) inverse of sharp ratio D) geometric average rate of logarithmic of annual return

Answer 100

A

Question 101

: Your friend has been monitoring the market, waiting for a good time to buy some GOOGL. Which of the following is the best technical indicator to move forward with the purchase? A) Prices have been increasing for a few days and just hit the higher Bollinger Bond. B) Prices have been increasing for a few days and just hit the lower Bollinger Bond. C) GOOGL announces earnings, which was more than expectations. D) GOOGL announces earnings, which was less than expectations.

Answer 101

B

Question 102

Does policy guarantee to converge? If it converges, does the optimal policy generates optimal value function? A) Yes, Yes B) Yes, No C) No, Yes D) No, No

Answer 102

A

Question 103

Based solely on the foregoing prices, how would you best describe the relationship between Stock A and Stock B? Date (dd/mm/yyyy) Stock A Price Stock B Price 1. 02/05/2018 $50.00 $32.21 2. 05/05/2018 $51.09 $31.98 3. 07/05/2018 $50.24 $32.73 4. 12/05/2018 $53.19 $30.74 5. 23/05/2018 $53.24 $30.50 A) Positively correlated B) Negatively correlated C) Insufficient data to determine correlation D) No correlation

Answer 103

B

Question 104

Which of the following schema is model free? A) Policy Iteration B) Value Iteration C) Q Learning D) Decision Tree

Answer 104

C

Question 105

Which of the statement of Q-learning below is False? A) The agents job is to maximize cumulative reward. B) Q-learning does not require a model of the environment and can handle problems with stochastic transitions and rewards. C) Agents actions affect the subsequent data it receives. D) The learning rate determines the importance of future rewards.

Answer 105

D

Question 106

Which one of the statements below is correct considering moving average? A) A moving average helps remove daily fluctuation from analysis. B) The shorter the time period under consideration, the easier it is to predict long-term trends. C) The longer the time period under consideration, the more sensitive the moving average is towards daily volatility. D) A moving average is always computed using the same arithmetic model.

Answer 106

A

Question 107

In Q-Learning an experience tuple is denoted by . What do the variables s, a, s' and r stand for? A) s = initial state, a = action, s' = new state, r = risk B) s = initial state, a = action, s' = new state, r = reward C) s = new state, a = action, s' = initial state, r = reward D) s = initial state, a = alpha value, s' = new state, r = risk

Answer 107

B

Question 108

When trying to increase performance according to the Fundamental Law, in general, which is easier to increase: skill or breadth? A) Skill B) Breadth

Answer 108

B

Question 109

Information Ratio IR is the Sharpe Ratio of: A) Excess Daily Return B) Cumulative Return C) Average Daily Return D) Benchmark Return

Answer 109

A

Question 110

If a portfolio manager's skill remains constant(IC) and to improve the overall performance(IR) of portfolio by 5 times, using the fundamental law how much should the number of trades increase by? A) 5 times B) 25 times C) 10 times D) 100 times

Answer 110

B

Question 111

For the update rule of Q table, a higher value of alpha and a higher value of gamma indicate which of the following? A) The previous value of Q is preserved less; The learning process is less quickly; The later rewards are valued more B) The previous value of Q is preserved more; The learning process is less quickly; The immediate rewards are valued less C) The previous value of Q is preserved less; The learning process is more quickly; The later rewards are valued more D) The previous value of Q is preserved less; The learning process is more quickly; The later rewards are valued less

Answer 111

C

Question 112

For a portfolio consisting of two stocks, what kind of correlation between the stocks minimizes the volatility or risk of the portfolio? A) Positive correlation (i.e. near +1 correlation) B) Correlation does not affect portfolio risk, only covariance. C) No correlation (i.e. near 0 correlation) D) Negative correlation (i.e. near -1 correlation)

Answer 112

D

Question 113

Which is NOT the assumption of efficient markets hypothesis? A) Price does not reflect all available information B) Large number of investors in the market C) New information is constantly arriving D) Price adjust quickly

Answer 113

A

Question 114

Which form of the Efficient Market Hypothesis states that stock prices are affected by ONLY the past price information. A) Weak B) Semi-strong C) Strong D) All of the above.

Answer 114

A

Question 115

Andrey Markov was a Russian mathematician that created the concept of stochastic process modeling that we now call the Markov decision process (MDP). In the mathematics of MDPs, S normally represents the possible states, A represents the possible actions that can be taken, and R represents the rewards. What does π represent? A) The optimal policy B) The current estimate of the policy C) The optimal value of the state D) The current estimate of value at that state

Answer 115

B

Question 116

Consider three different funds that increase by 10% over a trial period. Fund A holds 1 stock, Fund B holds 2 stocks that are anti- correlated, and Fund C holds 2 stocks that are positively correlated. Which fund carries the least risk? A) Fund A B) Fund B C) Fund C D) Fund B and Fund C carry equivalently low risk.

Answer 116

B

Question 117

Which of the following is false when thinking of a market as a reinforcement problem? A) Selling is a state B) Market is the Environment C) Price is a state D) Market feature is a state

Answer 117

A

Question 118

Which of the following is not an Efficient Market Hypothesis assumption? A) There are a large number of investors interacting in the market for profit. B) New information arrives randomly. C) Current price reflects all available information. D) Single stocks often outperform the market.

Answer 118

D

Question 119

how does Bollinger band predict the price of the stock? A) the price of the stock is bracketed by an upper and lower band along with a 21-day simple moving average. B) the price of the stock is the same as simple moving average. C) average price of the stock of the same day. D) the difference of upper band and lower band.

Answer 119

A

Question 120

The information coefficient (IC) of a manager is 0.2 . The manager makes monthly bets on 27 stocks. What is the information ratio(IR) (or performance) of the manager? A) 0.6 * sqrt(3) B) 5.4 C) 0.45 * sqrt(3) D) 3.6

Answer 120

D Performance is annual, so it should be IR = 0.2 * sqrt(27*12) = 3.6

Question 121

The equation for Grinold's Fundamental Law of Active Portfolio Management is: A) Information Ratio (IR) = Information Coefficient (IC) * sqrt(Breadth) B) Information Ratio (IR) = Information Coefficient (IC) * Breadth C) Information Coefficient (IC) = Information Ratio (IR) * sqrt(Breadth) D) Information Coefficient (IC) = Information Ratio (IR) * Breadth

Answer 121

A

Question 122

What portfolios lie on the efficient frontier? A) The portfolios with the highest Sharpe ratio B) The lowest risk portfolios for each level of return C) The highest return portfolios for each level of Sharpe ratio D) The portfolios with the lower risk

Answer 122

B

Question 123

Consider trading as a reinforcement learning problem. Which of the following defines the state of the environment of the trading problem? A) Buy B) Sell C) Return from trade D) Bollinger Value

Answer 123

D

Question 124

Which of the following is true about the Efficient Market Hypothesis? A) There are a small number of investors B) New information arrives randomly C) Prices adjust slowly D) prices don't reflect all available information

Answer 124

B

Question 125

Using the principles behind portfolio optimization what is one element we should be considering in order to minimise our portfolio risk if our portfolio consists of two stocks? A) Ensure the co-variance between the two stocks is positive B) Ensure that the standard deviation of the stock prices is minimal C) Ensure that the co-variance between the two stocks is negative D) Use the air speed of an unladen swallow to determine portfolio percentage.

Answer 125

C

Question 126

If a call option is far 'out of the money' the value of the option will be: A) Equal to the value of a put option with the same exercise price B) Greater than the value of a put option with the same exercise price C) Less than the value of a put option with the same exercise price D) None of the above is correct

Answer 126

C

Question 127

What is a Synthetic CDO? A) CDO of defaulted mortgages B) CDO of triple-A rated bonds C) CDO of bets placed based on the performance of other assets D) CDO of treasury bonds

Answer 127

C

Question 128

If your reward function outputs positive values for correct answers and zero for incorrect answers, what could be causing a wrong policy after training? A) Not having a balanced number of training instances for each state. B) Using a recursive function for policy learning. C) The reward function should only output positive values. D) All of the above are correct.

Answer 128

A

Question 129

Consider 5 stocks A, B, C, D and E, each having a daily return of 10%. Following is their covariance matrix : A B C D E A 1 0.9 -0.9 -0.9 -0.9 B 0.9 1 -0.9 -0.9 -0.9 C -0.9 -0.9 1 0.9 0.9 D -0.9 -0.9 0.9 1 0.9 E -0.9 -0.9 0.9 0.9 1 Which of the following would be most optimal portfolio? A) 20% A, 20% B, 20% C, 20% D, 20% E B) 25% A, 25% B, 16.6% C, 16.6% D, 16.6% E C) 33.3% C, 33.3% D, 33.3% E D) 50% A, 50% B

Answer 129

B

Question 130

What is the semi-strong form of Efficient Markets Hypothesis? A) Tells us that an asset's price reflects all publicly available info B) Tells us that an asset's price reflects all public and private info available C) Tells us that an asset's price reflects past trading volumes and corresponding prices

Answer 130

A

Question 131

What does breadth refer to in the Fundamental law of active portfolio management ? A) Breadth of investor's expertise B) Investor's Skill level C) Number of trades / Opportunities that the investor has access to D) A and C

Answer 131

C

Question 132

In which trading horizon is fundamental analysis more valuable than technical analysis? A) Days B) Milliseconds C) Years D) All of the above

Answer 132

C

Question 133

An option that can be exercised profitably for the holder is said to be _______ ; otherwise, it is _______ . A) out of the money; in the money B) in the money; out of the money C) a tax liability; speculative bet D) covered call; naked call

Answer 133

B

Question 134

Which of these is NOT input to Mean-Variance Optimization? A) Expected Return B) Volatility C) Covariance D) Risk

Answer 134

D

Question 135

What’s the different steps required to define a Reinforcement Learning problem? A) Set of states (S), Set of actions (A), Transition function (T), Reward function (R) B) Set of states (S), Set of actions (A), Transition function (T), Reward function (R), Policy (π) C) Transition function (T), Reward function (R) D) Set of states (S), Set of actions (A)

Answer 135

B

Question 136

Which of the following is NOT TRUE in the Fundamental Law A) information ratio is related to the beta component of the return of a portfolio B) performance is measured as information ratio C) breadth is related to number of trades D) performance = skill * sqrt(breadth)

Answer 136

A

Question 137

Which of the following is true about weak form of EMH: A) There is no type of information that can give an investor an advantage on the market. B) Ones cannot predict future stock prices on the basis of past stock prices. C) Ones cannot predict future stock prices on the basis of all information, future product launches, R&D Developments. D) Both A and B.

Answer 137

B

Question 138

According to the semi-strong form of Efficient Market Hypothesis, people who invest in stocks of a company after the company releases very positive news concerning the stock can expect to earn a/an A) Normal return because the stock will be fairly priced when bought. B) Loss because things are usually not what they seem. C) Zero return because the next price of stock is expected to be the same as the last price. D) Very high return because the new information will not affect the stock price until later.

Answer 138

A

Question 139

Consider stocks A, B, C. A and B have a positive covariance of 0.8, B and C have a negative covariance of -0.8. Which of the following allocations would have minimum risk, but achieves target returns? A) A: 0.5 B: 0.5 C: 0.0 B) A: 0.0 B: 0.5 C: 0.5 C) A: 0.25 B: 0.25 C: 0.5 D) A: 0.5 B: 0.25 C: 0.25

Answer 139

C

Question 140

https://imgur.com/0TLM8HE Use the figure linked above to answer the following question: Let this chart represent the efficient frontier for some portfolio, the minimum return denoted by the green line, and the maximum risk by the red line. Which of these portfolio(s) are considered "acceptable"? A) a, b, and d B) b and c C) d and a D) b

Answer 140

D

Question 141

What are the 'layers' of a mortgage bond called (i.e. AAA, BBB, etc.)? A) Levels B) Tranches C) Properties D) Pools

Answer 141

B

Question 142

Which of the following isn't an input to Mean Variance Optimization? A) Volatility B) Expected Returns C) Sharpe Ratio D) Covariance

Answer 142

C

Question 143

John creates a portfolio of assets performing above the efficient frontier. What does this mean? A) His portfolio is optimal. B) His portfolio is suboptimal. C) His portfolio is superoptimal. D) His portfolio is not possible.

Answer 143

D

Question 144

: Which of the following is a characterization of the Efficient Markets Hypothesis? A) Markets efficiently incorporate all public information, which consequently renders beating the market impossible. B) The stock market in the U.S. outperforms every other stock market in the world. C) Stocks earn a higher return than bonds, because they are riskier investments. D) The Efficient Markets Corporation should be included in the S&P500 index.

Answer 144

A

Question 145

How many shares are typically included in an options contract? A) 10 B) 50 C) 100 D) 1000

Answer 145

C

Question 146

As you increase the "lookback" period from 5 days to 100 days, how will the line representing the simple moving average (SMA) change? A) It will likely become more "staggered" looking, with many more highs and lows B) It will likely become "smoother" looking, with fewer highs and lows. C) It will become indistinguishable from the price line. D) It depends on the stock, there is not enough information to tell.

Answer 146

B

Question 147

Based on the Fundamental Law of active portfolio management, Information Ration (IR) can be identified as: A) The correlation of the manager’s forecast on actual returns. B) The beta of the portfolio times the return on the market for that day. C) The sharpe ratio of excess return. D) The average of the historic daily values of alpha over the average of the historic daily values of beta for a portfolio.

Answer 147

C

Question 148

Which choice will increase the information ratio the most? A) Increase information coefficient by 0.1 B) Increase information coefficient by 600 C) Increase breadth by 300 D) Increase breadth by 500

Answer 148

D?????

Question 149

: In regard to QLearning, which of the following in terms of reward results in faster convergence? A) r = daily return B) r = 0 until exit, then cumulative return C) None of the above D) Both A and B are correct

Answer 149

A

Question 150

: If you think that you can beat the market using only prior trading data, you believe that A) The market is inefficient and the weak form of the efficient market hypothesis is false. B) The market is efficient and the weak form of the efficient market hypothesis is true. C) The market is inefficient and the strong form of the efficient market hypothesis is false. D) The market is efficient and the strong form of the efficient market hypothesis is true.

Answer 150

A

Question 151

What is the correct order of building a Q-Learning model: (1) define combined states, actions, rewards (2) choose in-sample training period (3) iterate and update the Q-table (4) implementing backtesting A) (1) (2) (3) (4) B) (1) (3) (2) (4) C) (3) (1) (2) (4) D) (2) (1) (4) (3)

Answer 151

A

Question 152

What makes reinforcement learning different from other machine learning paradigms? A) There is no supervisor, only a reward signal B) Feedback is instantaneous C) Time does not matters D) Agent's actions do not affect the subsequent data it receives

Answer 152

A

Question 153

According to the lectures, which of these is NOT an input to mean-variance Optimization? A) Expected return B) Volatility C) Covariance D) Asset weights

Answer 153

D

Question 154

Information which is reflected in current market prices with help of past price movements is classified as A) weak form efficiency B) semi strong form efficiency C) strong form efficiency D) market efficiency

Answer 154

A

Question 155

According to lectures, which of these is NOT one of the four inputs for mean-variance optimization? A) Target return B) Expected Return C) Covariance D) Asset Weights

Answer 155

D

Question 156

Which of the following cannot be used for technical analysis? A) intrinsic value B) percent bollinger C) Simple Moving Average Of Price D) percent change in volumne

Answer 156

B????? A?

Question 157

The CEO of a credit rating agency learns from his CTO that their databases were breached by attackers in a massive attack, but the knowledge has not been made public yet. He tells his family to SHORT his company's stock before the press conference to announce the breach. Under which form(s) of the Efficient Markets Hypothesis will this yield results for his family? A) Strong form B) Strong and Semi-strong forms C) Semi-strong and Weak forms D) Semi-strong form

Answer 157

C

Question 158

The fundamental law states that in order to increase the performance(IR), breadth and information coefficient will have what effect? A) If increasing the breadth component by two times the current BR, the IR will increase by two times B) If increasing the breadth component by four times the current BR, the IR will increase by two times C) If increasing the information coefficient by two times the current IC, the IR will increase by four times D) If increasing the information coefficient by four times the current IC, the IR will increase by four times

Answer 158

B, D

Question 159

Which of the following statements about Q-Learning and Dyna is TRUE? A) Q-Learning is guaranteed to converge to the optimal policy B) Q-Learning is a greedy algorithm C) Q-Learning will converge faster using long-term rewards instead of short-term rewards D) Dyna is useful for speeding up runtime

Answer 159

A

Question 160

If the semi-strong efficient market hypothesis were proven true, which of the following would remain reliably profitable trading strategies? A) Investing in a hedge fund with a high alpha B) Trading based on insider information (and getting away with it) C) Building a trading stategy based on past price movements D) Quickly identifing good and bad news concerning an asset and trading it accordingly

Answer 160

B

Question 161

When is Technical Analysis effective? Choose correct answers. A) Works better over longer time periods than shorter time periods B) To look for contrasts (stock vs market) C) Combinations for multiple indicators are weaker D) Individual indicators are strong

Answer 161

B

Question 162

Which of the following statements about Q learning is true? A) A low value of alpha means that previous Q value is more strongly preserved. B) A low value of alpha means that new Q value is more strongly preserved. C) A low value of gamma means that we value later rewards very significantly D) None of the above

Answer 162

A

Question 163

In the Coin Flip Casino problem, the risk-adjusted reward in a multi bet scenario is given by: A) sqrt(SR_single)*sqr(BR) B) sqr(SR_single)*sqrt(BR) C) SR_single*sqrt(BR) D) SR_single*sqr(BR)

Answer 163

C

Question 164

Price to earnings ratios show persistent correlation with long-term annualized returns on stocks. This data appears to refute: A) weak form of Efficient Market Hypothesis (EMH) B) Semi-strong form of EMH C) Both (a) and (b) D) No versions of EMH, as it is already priced into stock values

Answer 164

B

Question 165

Select the statement which is TRUE regarding using RL for market trading? A) We can use the policy iteration algorithm to find the optimum policy because our transition matrix is well defined. B) We can use the value iteration algorithm to find the optimum policy because our reward function is well defined. C) We can look at previous transitions and use a model to form an optimum policy. D) If we know the reward discount rate (denoted by gamma), we can use the value-iteration algorithm to find the optimal policy.

Answer 165

C

Question 166

Reinforcement Learning can be applied for trading in the following context A) Predict Future Price of a Stock B) Use as a Price Indicator C) Predict whether to Buy or Sell D) Its only for beating Games like Go

Answer 166

C

Question 167

Which one of the following information would hold us back(not encourage) from applying Technical Analysis for a stock? A) Current price of the stock & price movements discounts everything i.e. prices fully reflect all the information B) Performance of annual, quarterly reports (earnings, employee costs, development costs) C) Information on percentage change in volume of stocks since beginning D) Price correlation information of the stock with market

Answer 167

B

Question 168

What do Synthetic CDOs (Collateralized Debt Obligation ) primarily invest in? A) Real estate equity B) Mortgage Bonds C) Housing property D) Credit default swaps

Answer 168

D

Question 169

Alice's portfolio has the same mean performance alpha, as well as the same volatility as Bob's portfolio. Alice makes 4 trades per year and Bob makes 64 trades per year. Comparing each of their skill levels in making trades we can say that: A) Alice is 4 times more skillful than Bob B) Alice is 16 times more skillful than Bob C) Bob is 4 times more skillful than Alice D) Alice and Bob have the same skill level

Answer 169

A

Question 170

Which of the following is FALSE based on The Fundamental Law applied to active portfolio management? A) Sharpe Ratio grows faster as breadth increases (relative to skill) B) Higher alpha generates a higher Sharpe Ratio C) More trading opportunities provides a higher Sharpe Ratio D) Sharpe Ratio grows faster as skill increases (relative to breadth)

Answer 170

A

Question 171

Which of the following statements is FALSE about discounted reward? A) The closer gamma is to 1, the less we value rewards in the future. B) The closer gamma is to 0, the less we value rewards in the future. C) If the gamma=1, then the equation is the same as infinite horizon. D) Gamma is a value from 0.0 to 1.0

Answer 171

A

Question 172

Which Efficient Market Hypothesis assumption does not lead to prohibiting fundamental information for making investment decisions? A) Large Number of Investors -- since the fundamental information is known to everyone the number of investors does not affect how the information is used B) New Information arrives Randomly -- since the fundamental information is released at regular intervals to everyone, there is not randomness in how information arrives C) Prices Adjust Quickly -- since the fundamental information is broad knowledge about the company, it does not matter how quickly the price changes

Answer 172

???

Question 173

: Which of the following is NOT assumed by the efficient market hypothesis? A) There is a large number of investors participating in the market. B) New information arrives predictably. C) A stocks price quickly adjust to any new information. D) A stocks current price reflects all information about that stock.

Answer 173

B

Question 174

When trying to maximize reward in reinforcement learning, what formulation is not valid? A) infinite horizon B) Markov decision C) finite horizon D) discounted reward

Answer 174

B

Question 175

When normalizing technical indicators, you divide by: A) the mean B) the standard deviation C) the value on day 1 D) the sum of all values

Answer 175

B

Question 176

Consider a European call option for 100 shares of IBM Corporation, whose strike price is $170 per share and which matures 18 months from now. What does this option entitle you to do? A) At the maturity date, that is 18 months from now, you have the right, but not the obligation to purchase 100 shares of IBM Corporation for $170 per share. B) Between now and 18 months from now, you are entitled to make a phone call to the European headquarters of IBM Corporation to inquire about the value of 100 shares of IBM. C) Between now and 18 months from now, you have the right, but not the obligation to purchase 100 shares of IBM Corporation for $170 per share.

Answer 176

??????

Question 177

When mapping trade to RL, which of these is not considered a state? A) Bollinger Value B) Holding a Stock C) Selling a Stock D) Daily Return from the stock

Answer 177

C

Question 178

Grinold's Fundamental Law seeks to mathematically relate which facets of investing? A) Performance and Skill B) Risk and Diversification C) Performance, Skill, and Breadth D) Risk, Returns, and Breadth

Answer 178

C

Question 179

Given two active investors with two different information ratios. Investor A has an Information Coefficient of 0.02 and executes 1000 independent trades a year. Investor B has an IC of 0.05 and executes 100 trades a year. Which investor is expected to have the highest IR based on the Fundamental Law. A) Investor A B) Investor B C) They have the same D) We cannot tell

Answer 179

A

Question 180

Technical analysis considers the intrinsic value of a company: A) False B) True

Answer 180

A

Question 181

If given a choice for the frequency that time-series reward values are evaluated by a Q-Learner, which would result in the fastest convergence? A) Rewards evaluated at the end of each day B) Rewards evaluated at the end of each year C) Rewards evaluated at the end of each second D) Rewards evaluated at the end of the sample period

Answer 181

C

Question 182

According to the Efficient Market Hypothesis (EMH) a stock can deviate from its fair value market price if it is undervalued or overvalued. Please mark True or False. A) True B) False

Answer 182

B

Question 183

According to the Fundamental Law of Active Portfolio Management, the information coefficient is defined as: A) the standard deviation of theoretical returns divided by actual returns B) the number of trading opportunities presented to a portfolio manager over time C) the correlation of portfolio manager's prediction about asset's price with their actual future prices D) the amount of information gained about a given asset

Answer 183

C

Question 184

In the Q-Learning algorithm assume we are in the second iteration with an experience tuple. List down the correct sequence of the below given steps to be followed to make sure we correctly update our Q table 1 Information we just learned is taken to improve Q 2 Observe reward and s' 3 State s is computed 4 Q table is set with small random numbers and the time is initialized 5 We consult our policy, or in other words we consult Q to find the best action in the current state A) 45321 B) 34512 C) 43521 D) 35421

Answer 184

C

Question 185

Grinold's Fundamental Law applies to passive portfolio management A) True B) False

Answer 185

B

Question 186

When trading strategy is represented as a reinforcement learning problem, the "reward" parameter represents what value? A) The exponential weighted average of the previous 21 trading days. B) The return on our investment. C) The standard deviation of daily returns so far. D) The Sharpe Ratio.

Answer 186

B

Question 187

One of the variables for the fundamental law is the skill of investor in selecting securities. How does this investor increase this variable? A) Increase his breadth of knowledge B) Increase his width of knowledge C) Learn outer but related markets D) Partner up with another investor with same knowledge

Answer 187

A

Question 188

Among four strategies of options, which one’s maximum loss is theoretically unlimited? Therefore, we should manage this strategy very carefully. A) Buy Call B) Buy Put C) Write Call D) Write Put

Answer 188

C

Question 189

Select the FALSE statement about technical analysis below: A) As compared to fundamental analysis, technical analysis works better on smaller time scales B) An example using technical analysis may take into account stock price, volume, and book value C) Technical analysis strategies are highly utilized in Hedge Funds D) Sharpe ratio, price momentum, and Bollinger Band position would all be considered indicators in technical analysis

Answer 189

B

Question 190

Tom bought 1 option for AAPL of which the strike price is $110. The price of this option is $5. Suppose before the expiration date, the stock price of AAPL went up to $120 and Tom decided to exercise his options, and then sell the stocks at the $120 position immediately. What is the profit from this series of trades made by Tom? Assume no extra fees such as commissions. A) $500 B) $5 C) $1000 D) $995

Answer 190

A

Question 191

Current stock price for IBM is $115/share and custom A buy a option $110 with 2.75 for December 10th. If IBM stock price drops to $110/share on that day, how much will customer A lose? A) 11500 B) 11000 C) 775 D) 275

Answer 191

D

Question 192

It is best to select a portfolio along the efficient frontier because: A) It results in a portfolio with negligible risk for a given return B) It results in a portfolio optimized for maximum return for a given risk C) It results in a portfolio that is blended and equally weighs risk and return D) It results in a portfolio that is built to be further optimized by a learner

Answer 192

B

Question 193

Which of the following is NOT a component that defines a Markov Decision Problem. A) Set of Actions A B) Probabilistic Function P C) Transition Function T D) Set of States S

Answer 193

B

Question 194

Which of these is NOT a correct way of representing the Transition function (T) for a Markov Decision Problem (MDP) A) T(s) B) T(s,𝝅) C) T(s,a)

Answer 194

B

Question 195

You write a call for APPL at a strike price of 112 dollars and a Last value of 1.55. At the option's expiry the price of APPL is valued at 114. Assuming that the option was exercised, what was your profit/loss? A) -45 B) 45 C) 200 D) -200

Answer 195

A

Question 196

The weak version of Efficient Market Hypothesis prohibits us from profiting from fundamental analysis because it says that prices adjust quickly to new public information such as company's quarterly reports. A) True B) False C) Insufficient information D) Depends on circumstances

Answer 196

B

Question 197

Suppose you want to blend 3 stocks in your portfolio. ABC, LMN, XYZ are the stocks. ABC has a -0.9 covariance with LMN. LMN has a +0.9 covariance with XYZ. What is the best blend of these stocks to minimize portfolio risk? A) ABC 50%, LMN 25%, XYZ 25% B) ABC 25%, LMN 25%, XYX 50% C) ABC 33%, LMN 33%, XYZ 33% D) ABC 10%, LMN 10%, XYZ 80%

Answer 197

A

Question 198

: What are the two components to the Q function in Q- learning? A) immediate reward and discounted reward B) ventured path and frontier states C) transitions T and rewards R D) utility function and Bollinger bands

Answer 198

A

Question 199

If the efficient markets hypothesis is true, then stock prices ________ and returns are ________ . A) fluctuate randomly, evenly distributed B) fluctuate randomly, normally distributed C) do not fluctuate, evenly distributed D) do not fluctuate, normally distributed

Answer 199

B

Question 200

1) "Amazing Birds", a pet birds chain which primarily sells macaws. 2) "Royal Chicken Burgers", a burger food main, as their name suggests 99% of there menu have on chicken as its main ingredients. 3) "Get Proteins" a Broiler chicken chain. are three hypothetical companies, the stock price of all these companies goes down after the news of an outbreak of Avian flu also known as Birds flu across the globe, what kind of information is this? A) Endogenous B) Fundamental C) Insider D) Exogenous

Answer 200

D

Question 201

An employee of a company buys 500 shares of the company stock before a major product announcement. Then the price of the stock goes up. Which one of the following assumptions are true? A) Weak efficient market hypothesis has proved right B) Strong efficient market hypothesis has proved wrong C) Strong efficient market hypothesis has proved right D) Both A and B

Answer 201

B

Question 202

What is credit default swap? A) A credit default swap is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default B) A credit default swap is a financial swap agreement that the buyer of the CDS will compensate the seller in the event of a debt default

Answer 202

A

Question 203

Which of the following statements is FALSE with respect to the EMH(Efficient Markets Hypothesis)? A) We can profit by building a portfolio based off of insider information. B) Fundamental analysis will not aid in building a profitable portfolio. C) Analysis of historical prices cannot lead to profit. D) Prices adjust rapidly to new public information.

Answer 203

A???

Question 204

Which of the following analyses would become unsuccessful if the form of EMH switch from semi-strong to strong? A) Technical B) Fundamental C) Insider D) None of the above

Answer 204

C

Question 205

When considering a Reinforcement Learning problem, ALL of the following TRUE, EXCEPT: A) 'S' is the series of all previous states that led to our current state B) Our policy, 𝝅, takes in a state 'S' and outputs an action 'a' C) Action 'a' is taken in the environment and the environment then transitions to a new state D) Reward 'r' for taking a certain action helps the learner arrive at the optimal policy

Answer 205

A

Question 206

According to the Fundamental Law of Active Portfolio Management, if the information coefficient is measured at 0.001, how many trades need to be executed in a year in order to attain 40% performance? A) 160,000 B) 40,000 C) 4,000,000 D) 1,600,000,000

Answer 206

A

Question 207

Which of the following is NOT true about the Fundamental Law of Active Portfolio Management? A) To double performance at the same level of skill, one must find four times as many opportunities to trade. B) Breadth is defined as the number of shares held in a portfolio over the course of a given year. C) The information ratio measures one's ability to generate excess returns relative to a benchmark. D) Two ways to increase the breadth of a portfolio are to hold more assets at once or to turn those equities over more frequently.

Answer 207

B

Question 208

Which of following statement is not true about the efficient frontier? A) The efficient frontier represents the optimal portfolio with lowest risk given the target return B) There is no possible portfolio that can never exceed the efficient frontier (have better performance) C) The risk may be higher even though the target return is reduced. D) Each tangent line of efficient frontier represents the maximum sharp ratio given the target return

Answer 208

D The slope of that line represents the maximum Sharpe ratio we can achieve with this collection of assets

Question 209

As we move along the efficient frontier towards the origin, is it possible that we get lower return but higher risk? A) Yes B) No

Answer 209

B???? Note that, as we reduce the return, the associated risk sometimes increases.

Question 210

We want the value of one particular future reward to be 5 after 3 steps (i=3) instead of its immediate reward value of 20 at time = 0. What should our discount rate be? A) 0.25 B) 0.5 C) -0.25 D) (.25)^1/3

Answer 210

B

Question 211

The goal of an Reinforcement Learning algorithm is to find a policy that maps a policy state to an action such that the future sum of the reward is maximized A) This statement is true B) This statement is false

Answer 211

A

Question 212

Which one of these is not a value used to evaluate a portfolio? A) Cumulative Return B) Volatility C) Adjusted Closing Price D) Sharpe Ratio

Answer 212

C

Question 213

If you have built a learner for trading stocks. To increase the Information Ratio, you want: A) Adjust your Information Coefficient to an optimal value B) Decrease the number of trading opportunities C) Improve the prediction skills of the learner D) Decrease the correlation between forecasts and returns

Answer 213

C

Question 214

What is CDO-square? A) A CDO with a leverage of 2 B) A CDO backed primarily by the tranches issued by other CDOs C) A type of structured asset-backed security (ABS) based on S&P500 D) A CDO that earns by shorting other CDOs

Answer 214

B

Question 215

Which of the following statements about technical analysis is not true? A) Technical analysis is most useful for shorter time periods B) Technical analysis Includes price data only C) Technical analysis performs better considering multiple indicators D) Technical analysis is useful in detecting deviation of a stock from the market

Answer 215

B

Question 216

Which of the following statement about Q-Learning is true? A) Q-Learning uses models of rewards, state and actions. B) Q-Learning is guaranteed to converge towards the optimal solutions. C) Q-Learning is a model free approach. D) Q-Learning can only be applied to domains where all states and transitions are fully defined.

Answer 216

C

Question 217

If Person A's Information Coefficient is 20 times higher than Person B's, then how much higher than Person A does Person B's Breadth of the portfolio need to be in order to match Person A's investments? A) 200 times B) 50 times C) 400 times D) 100 times

Answer 217

C

Question 218

Which of following statement is true when we compare reinforcement learning with supervised learning ? A) Input is not available in reinforcement learning while it is available in supervised learning B) Output is available in supervised learning while it is not available in reinforcement learning C) Exploitation or exploration are part of supervised learning D) In Reinforcement Learning, the goal is to learn the general formula from the given examples by analyzing the given inputs and outputs of a function

Answer 218

B

Question 219

Which of the following statements about the efficient frontier is NOT true? A) Different points on the efficient frontier have different levels of risk and return. B) Points on the efficient frontier are the portfolio allocation with the lowest risk for a given return value. C) Points below the efficient frontier represent suboptimal portfolio allocations. D) Investors should target portfolios at or above the efficient frontier because the efficient frontier represents portfolios that provide the minimally adequate return for a given level of risk.

Answer 219

D

Question 220

If the standard deviation of alpha values for a portfolio increases by a factor of 4 (and the mean alpha is unchanged), what will happen to the information ratio (IR) for the portfolio? A) It will increase by 4 times B) It will increase by 2 times C) It will decrease by 4 times D) It will decrease by 2 times

Answer 220

C

Question 221

Which one is/are least expensive environment is used in Dyna ? A) Real environment B) Simulated environment C) Both real and simulated are equally expensive D) None of the above

Answer 221

B

Question 222

Which of the following is NOT a characteristic of any version (weak, semi-strong, strong) of the Efficient Market Hypothesis? A) Can make money on insider information, as it can be leveraged B) Future prices cannot be predicted by analysis of historical/past prices C) Public reports cause instantaneous changes in price D) Prices adjust immediately to new public information

Answer 222

A

Question 223

Which of the following best describes the given or initially known information in a general reinforcement learning approach? A) A set of inputs labeled with outputs B) A set of inputs without labels to outputs C) A set of all possible states and a set of possible actions from each state D) A set of all possible states, a set of possible actions from each state, the transition function, and the reward function

Answer 223

C

Question 224

Which of the following is a limitation of the Efficient Frontier? A) Asset returns do not follow a normal distribution B) It is not possible to balance securities efficiently C) The degree of risk is too high for the market D) Assets do not follow a heavy-tailed distribution

Answer 224

A

Question 225

Which option below is not a right description of the different form of EMH? A) Weak EMH means future prices CANNOT be predicted by historical (no technical) B) Semi-Strong EMH means prices adjust slowly (no fundamental and technical) C) Semi-Strong EMH means prices adjust rapidly (no fundamental and technical) D) Strong EMH means prices reflect all info (public and private) (no insider, technical, or fundamental)

Answer 225

B

Question 226

What is incorrect according to Efficient Markets Hypothesis (EMH)? A) The weak form of the EMH suggests that future asset prices cannot be predicted based on historical price data alone. B) Technical analysis can be used in weak form of EMH because some market inefficiencies can be exploited C) The semi-strong form of the EMH suggests that fundamental and technical analysis are of little use because opportunities have been arbitraged away immediately. D) The strong form of the EMH suggests that no known arbitrage opportunities exist.

Answer 226

B

Question 227

Stock for JPM is: $200 on 2010-10-01 $400 on 2010-10- 02 $400 on 2010-10-03 $100 on 2010-10-04 $700 on 2010-10-05 Calculate the simple moving average for the stock on 2010-10-04 with a lookback window of 3 days. Also, assuming the price at 2010-10-04 is a large enough excursion from the SMA, would you consider this a buy or sell opportunity? A) -2/3 buy B) -2/3 sell C) 1/3 sell D) 1/3 buy

Answer 227

A

Question 228

Select the version of EMH for which the following statement holds true: "Future asset prices cannot be predicted using historical price and volume data. " A) Semi-strong form B) Weak form C) Strong form D) None of the above

Answer 228

B

Question 229

If a stock's price was $50.00 10 days ago and is $45.00 now, what is the value of the 10-day momentum for this stock? A) 0.9 B) -0.1 C) 1.1 D) 0.1

Answer 229

B

Question 230

Given two trade strategies with the same expected return (reward), trade strategy A involves a single trade with a Sharpe Ratio of 0.15, while trade strategy B involves 144 trades over a one-year period. What is the Sharpe Ratio of trade strategy B? A) 55.8 B) 1.8 C) 0.06 D) 2.87

Answer 230

B????????????

Question 231

Which of the following statement is false on The Fundamental Law? A) Information Ratio (IR) is a measure of manager's performance B) Information Coefficient (IC) is correlation between manager's prediction of the market and actual market. C) Breadth (BR) is the number of trading opportunity per day D) IR = IC * sqrt(BR)

Answer 231

C

Question 232

: The subprime lending industry ... A) attracted sleazy people B) was fragmented C) was a fast-buck business D) all of the above

Answer 232

D

Question 233

: If you are 1/100 as smart as Warren Buffet, and he trades 100 times per year, how many times do you need to trade per year in order to get the same risk adjusted reward? A) 100 B) 100^2 C) 100^3 D) 100^4

Answer 233

C

Question 234

Investor A has an Information Coefficient of .25 and a Breadth of 144 Investor B averages 3% return above the market and the standard deviation of these excess returns is 1% Select the correct statement comparing the information ratio of the two investors. A) IR of investor A > IR of investor B B) IR of investor A < IR of investor B C) IR of investor A = IR of investor B D) Not enough information

Answer 234

C

Question 235

Given the following closing prices for AAPL, what was the SMA (simple moving average) for the previous five days on Nov 7? Date Closing Price Oct 29 $5 Oct 30 $6 Oct 31 $4 Nov 1 $5 Nov 2 $8 Nov 5 $7 Nov 6 $8 Nov 7 $10 Nov 8 $11 Nov 9 $9 A) 7.6 B) 6 C) 6.4 D) 9

Answer 235

C

Question 236

Jason bought an European call option with exercise price of 100 dollars for stock A, when it expires the stock price is 80 dollars. A) Jason can make profit by shorting the stock at 100 dollars B) Jason will lose money by 20 dollar per share C) Jason will not lose or make money D) Jason can cut the loss by reselling the option

Answer 236

C

Question 237

What is the wrong statement about the fundamental law? A) Higher expected return generates a higher sharpe ratio B) More execution opportunities provides a higher sharpe ratio C) Sharpe ratio grows as the square of breadth D) Information ratio is a sharpe ratio of excess return

Answer 237

C

Question 238

Which Iteration method in reinforcement learning starts with random policy ? A) Policy Iteration B) Value Iteration C) Q - learning D) Both a & b

Answer 238

A

Question 239

Which of the following is NOT true about reinforcement learning : A) It is concerned with goal-directed learning and decision-making B) It learns from experience by interacting with the environment but not affecting it C) It can trade off suboptimal near term rewards to maximize a long term goal D) An agent interacts with environment using states, actions and rewards

Answer 239

B

Question 240

What form of the EMH says future prices cannot be predicted by analyzing historical prices? A) Weak B) Semi-strong C) Strong D) None of the above

Answer 240

A

Question 241

Which of the following option operations has an unlimited potential loss? A) BUY CALL B) BUY PUT C) WRITE CALL D) WRITE PUT

Answer 241

C

Question 242

Which of the following statements about the fundamental law is true? A) IC measures the skill of the Portfolio Manager B) IR is the same as Sharpe Ratio C) Breadth is irrelevant in a Buy and Hold trading strategy D) IR measures the skill of the Portfolio Manager

Answer 242

D?????

Question 243

Which of the following is not an RL algorithm we can use to find a good policy when mapping trading to Reinforcement Learning? A) Q Learning B) Value Iteration C) Policy Iteration D) Stock Iteration

Answer 243

D

Question 244

Which expression is the pseudocode for momentum? A) price[t-n] – price[t] B) (price[t]/price[t-n]) – 1 C) (price[t]/price[t-n:t].mean()) – 1 D) price[n:t].mean – price[t]

Answer 244

B

Question 245

Which of the following statements is false? A) Model-based reinforcement learning develops a policy by looking at the data. B) Model-based reinforcement learning can use value or policy iteration to build a policy. C) Q-learning is model-free reinforcement learning. D) Transition models and reward models are used to build a policy in model-based reinforcement learning.

Answer 245

A

Question 246

: According to the Noble Scientist Harry Markowitz, who is best known for his pioneering work in Modern Portfolio Theory, which of the following is true: ( Please select one best answer ): A) Bonds are always lowest risk assets B) Stocks are always lowest risk assets C) Blend of Stocks and Bonds could be lowest risk assets than either one of them individually D) Modern Portfolio Theory shows Efficient Frontier only for Stocks as Bonds are considered risk free

Answer 246

C

Question 247

Which of these investment factors was Richard Grinold NOT trying to relate to one another with the Fundamental Law? A) Breadth B) Skill C) SPY Prices D) Performance

Answer 247

C

Question 248

The efficient frontier is: A) the set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a given level of expected return B) the set of portfolios that would guarantee a no-loss bet on the market C) how a portfolio comprising a 60/40 mix of equities and bonds would perform at various risk-free rate of return assumptions D) the set of portfolios that satisfy a rational investor's preference for a safe and risk-adverse investment

Answer 248

A

Question 249

Which of the following may be an argument against the Efficient Market Hypothesis? A) Looking at patterns or trends in the stock market can provide inaccurate signals to buy/sell a stock B) A stock's value can be assessed differently by different investors and a stock's price typically takes time to respond to the market C) Looking for situations in which the stock's price is lower than usual to buy could be disadvantageous D) The indicators used can greatly vary the results of our approach to buy/sell stocks

Answer 249

B

Question 250

A and B are two friends who have the same Information Ratio. B has an algorithm that is 5000 times better than that of A, and B trades 100 times a year. How many times does A trade in a year? A) 250000000 B) 5000000000 C) 2500000000 D) 500000000

Answer 250

C

Question 251

There are 2 portfolio managers: A and B. B makes 4 times the number of trades than that of A in an year. If B has a correlation of greater than 0.5 with the actual returns then what should A's correlation with actual returns be in order to outperform B A) 1 B) 0.5 C) 0.9 D) A cannot outperform B

Answer 251

D???

Question 252

Stock options are sold from one party to another, given the option buyer to buy or sell a stock at a pre-agreed price within a certain period of time. A) the right and the obligation B) the right but not the obligation C) not the right but the obligation D) neither the right nor the obligation

Answer 252

B

Question 253

: The point at which the tangent line from origin hits the efficient frontier gives us A) Max Cumulative Return B) Max Sharpe Ratio C) Max Average Daily return D) Risk free return

Answer 253

B

Question 254

The Information Ratio (IR) is the same calculation as ________ , but only on the "skill" portion of the return. (Fill in the blank) A) Bollinger Ratio B) Sharpe Ratio C) Standard Deviation D) Information Coefficient

Answer 254

B

Question 255

According to the Q function, which statements are true regarding the Learning Rate, Alpha, and the Discount Rate, Gamma? A) The expected value of the Learning Rate, Alpha is 2.0. B) For valuing later rewards very significantly, we expect a high value of the Discount Rate, Gamma. C) For valuing later rewards not significantly, we expect a high value of the Discount Rate, Gamma. D) The expected value of the Discount Rate, Gamma is < 0.0.

Answer 255

B

Question 256

Which of the following is NOT one of the assumptions EMH makes? A) Prices adjust quickly to new information B) Prices reflect all available information C) New information arrives in a predictable way D) There is a large number of investors

Answer 256

C

Question 257

The EMH has three forms. The weakest one establishes that the level of information barely affects prices. What is true about future prices given the above? A) Future prices cannot be predicted because unpredictable external events may influence the prices. B) Future prices can be predicted because historical prices are used as an indicator. C) Future prices may be possible to predict based on information of price, volume and exogenous information. D) Future prices can be predicted, however not based on fundamentals.

Answer 257

????

Question 258

Which of the following form(s) of EMH prohibit profiting from Technical Analysis? A) Weak EMH B) Semi-strong EMH C) Strong EMH D) All

Answer 258

D

Question 259

Which strategy expose risk of unlimited lose (if executed alone)? A) Buy Call B) Write Call C) Buy Put D) Write Put

Answer 259

B

Question 260

If stock price has gone up from 99.9 to 100.1 from yesterday to today. What kind of price movement is expected for call option of strike price 100 with same expiration date? A) Call option price today is higher than yesterday B) Call option price today is lower than yesterday C) Call option price today is same as yesterday D) It's hard to say

Answer 260

D

Question 261

: What are the advantages of buying simple options over stocks? A) Cannot lose more then the premium paid up-front. B) Expirations Dates and Ownership of the stock. C) Leverage. D) Both A) and C)

Answer 261

D

Question 262

Which of the following is FALSE regarding learning rate "alpha" in Q-learning? A) A low value of alpha means that in the update rule, the previous value for Q[s,a] is more strongly preserved. B) Learning becomes more quickly as alpha increases. C) In a fully deterministic environment, we can consider using constant learning rate alpha = 1. D) In a stochastic environment, we can consider using constant learning rate alpha = 0.

Answer 262

D

Question 263

If the weak form of the Efficient Market Hypothesis is true, which of the following is right? A) Market history of a stock can be used to predict the stock’s future price B) It prohibits technical and fundamental analysis C) The weak version is more likely to apply to the largest, most transparent and liquid markets D) Insider trading will work for the weak form

Answer 263

D