Dear Participants,

This quiz has 20 questions. First 10 questions carries 1 mark each and next 10
questions carries 3 marks each.

Please note: some of the questions might have more than one correct option as well.

There are 10 theory questions and 10 numerical questions.

Concepts Covered: Market risk, Probability of modelling, Credit risk

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Question 1 1 pts
While making a statistical model, if a predictor attribute is missing, we should replace the missing value
with:

Mean

Median

Maximum

Minimum
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Question 2 1 pts
Altman’s z score (1968) was derived from the manufacturing industry

True

False

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Question 3 1 pts
When we create our migration metrics, we should note that the migration to Adjacent Rating Categories
should be ___________ than ‘farther’ rating categories.

Lower

Higher
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Question 4 1 pts
Asset correlation is computed by looking at the correlation of the industry indices to which the companies
belong

True

False
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this question.

Question 5 1 pts
Portfolio mean return = Sum of the weighted mean return of each bond.

True

False

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Question 6 1 pts
VAR is the __________loss over a target, horizon within a confidence interval (or, under normal market
conditions)

Maximum

Minimum

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Question 7 1 pts
Ownership, vintage, credit background of the promoters owning a borrower should be considered in credit
assessment process

True

False
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question.

Question 8 1 pts
Analytics has been recent addition in international stock markets and banks.

True

False
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this question.

Question 9 1 pts
Which of the following tool(s) can be used for assessing the performance of a logistic regression model?

RMSE

Adjusted R square

Confusion matrix

ROC curves
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question.
Question 10 1 pts
If we fit a classification algorithm such as logistic regression to unbalanced data, what is likely to be true
about the performance metrics?

Note : we have data set of 100 points and out of this 95 are 0 and 5 are 1.In order to increase the accuracy
classifier would label all of them as 0.

Accuracy is low

True positive rate is low

False positive rate is low

All of the above

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Question 11 3 pts
Based on the Data below, what is the mean return of the portfolio?

Mean Stdev of
Stock
returns returns

ACC 0.61% 4%

AP 1% 3.7%

Correlation: 0.3
Amount Invested: ACC: 4 Lakh, AP: 6 Lakhs
Price ACC = 599.75

Price AP = 797.4

0.644 %

Correct Answer

0.844 %
0.944 %

1.44%

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Question 12 3 pts

Mean Stdev of
Stock
returns returns

ACC 0.61% 4%

AP 1% 3.7%

Correlation: 0.3
Amount Invested: ACC: 4 Lakh, AP: 6 Lakhs
Price ACC = 599.75

Price AP = 797.4

Based on the data above, what is the standard deviation of the return of the portfolio?

3.6 %

3.9%

3.1 %

2.1 %

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Question 13 3 pts
Based on the Data below, what is the Parametric 99% VaR (Normal 99% = 2.33) of the portfolio?
 Mean Stdev of
Stock
returns returns

ACC 0.61% 4%

AP 1% 3.7%

Correlation: 0.3

Amount Invested: ACC: 4 Lakh, AP: 6 Lakhs

Price ACC = 599.75

Price AP = 797.4

- 6.37%

6.37 %

4.37 %

-4.37 %

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Question 14 3 pts
Altman’s Z Score Model (1968) specifies z as

Z (Public) = 1.2X1+1.4X2+3.3X3+0.6X4+1.0X5

Where if the company is healthy if z>?

2.99

1.99
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Question 15 3 pts
What is the efficiency of the below mentioned prediction?

Predicted Ratings

AAA AA A BBB

AAA 7 4

AA 52 17
Actual
Ratings
A 11 85 3

BBB 1 13 16

160/209

150/209

140/209

130/209

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Question 16 3 pts
Consider the following two classification matrices:

Classification Matrix #1:

Predicted = 0 Predicted = 1

Actual = 0 15 10
 Actual = 1 5 20

Classification Matrix #2:

Predicted = 0 Predicted = 1

Actual = 0 20 5

Actual = 1 10 15

To go from classification matrix #1 to classification matrix #2, how did we modify the threshold value?

Increase the threshold value

Decrease the threshold value

Dont Change the threshold value

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Question 17 3 pts
Identify the classification scenarios which would NOT require oversampling/undersampling

Good loans: 2%, Bad loans: 98%

Cancerous patients: 4%, Healthy patients: 96%

Fraudulent credit card transactions: 12%, non-fraudulent conditions: 88%

Defective toys: 21%; non-defective toys:79%

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Question 18 3 pts
A data analyst fits a linear regression model to explain how CIBIL score predicts the outcome of a loan
approval process: whether the loan is approved or rejected. He uses the following classification rule: If the
estimated value of y (the response variable) is more than 0.5, the corresponding loan is classified as 1; else,
zero. Which of the following is true about the model?
The classification rule is not sensitive to presence of outliers

The estimated value is not bounded between 0 and 1

Both (a) and (b) are true

Both (a) and (b) are false

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Question 19 3 pts

Suppose the coefficients of a logistic regression model with two independent variables are as follows: b 0 =
-6, b1 = 0, b2 = 1. b1 corresponds to x1 and b2 corresponds to x2. Assume that you use a threshold of 0.5 for
classification. Which of the following represents the correct classification boundary?

y = 1 if x1 > 6

y = 1 if x2 > 6

y = 1 if x1 < 6

y = 1 if x2 < 6

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question.
Question 20 3 pts
Given this ROC curve, which threshold would you pick if you wanted to correctly identify a small group
of patients who are receiving the worst care with high confidence?
t=0.2

t=0.3

t=0.7

t=0.8