Practice Question Set: Measures of Financial Risk

Chapter 1. Measures of Financial Risk Practice Question set contains 25 pages covering the following learning objectives:
* Describe the mean-variance framework and the efficient frontier.

* Explain the limitations of the mean-variance framework with respect to assumptions about return distributions.

* Compare the normal distribution with the typical distribution of returns of risky financial assets such as equities.

* Define the VaR measure of risk, describe assumptions about return distributions and holding period, and explain the limitations of VaR.

* Explain and calculate Expected Shortfall (ES), and compare and contrast VaR and ES.

* Define the properties of a coherent risk measure and explain the meaning of each property.

* Explain why VaR is not a coherent risk measure.

* Describe spectral risk measures, and explain how VaR and ES are special cases of spectral risk measures.

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