Algorithms Risk Assessment & Management 3

Question 1

In algorithmic trading, which risk control mechanism automatically halts trading when losses exceed a predefined threshold?

Accepted Answer

All of the above

Answer

Stop-loss orders, circuit breakers, and kill switches are all risk control mechanisms used in algorithmic trading to cap losses automatically.

Question 2

A risk assessment assigns HIGH likelihood and LOW impact to a vulnerability. Where does this risk typically fall in a 2×2 risk matrix?

Accepted Answer

Medium priority — monitor and plan

Answer

High likelihood combined with low impact places a risk in a medium-priority zone requiring monitoring and contingency planning rather than immediate costly action.

Question 3

What is the primary goal of a Fault Tree Analysis (FTA) in software risk management?

Accepted Answer

Identify combinations of events that can cause a top-level failure

Answer

FTA works top-down from an undesired system event, using Boolean logic gates to identify contributing causes and their combinations.

Question 4

Which concept describes an organization's willingness to accept risk in pursuit of its objectives?

Accepted Answer

Risk appetite

Answer

Risk appetite is the amount and type of risk an organization is willing to pursue or retain in order to achieve its strategic goals.

Question 5

An algorithm is deployed to a critical healthcare system. The team performs FMEA. What does this analysis primarily produce?

Accepted Answer

A ranked list of failure modes and their effects on system safety

Answer

Failure Mode and Effects Analysis (FMEA) identifies potential failure modes, their causes, effects, and severity to prioritize risk reduction efforts.

Algorithms Practice Test

Algorithms Practice Test

Algorithms Risk Assessment & Management 3