QFC Cheat Sheet 2026

The 30 highest-yield QFC facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Under the CIR (Cox-Ingersoll-Ross) model, what feature prevents interest rates from becoming negative? → The square root of the rate in the diffusion coefficient
2. The concept of 'best execution' in the context of quantitative trading requires brokers to: → Execute orders on terms most favorable to the client considering multiple factors
3. Which financial metric measures a company's profitability in relation to its revenue? → Profit margin
4. Under the 'constructive receipt' doctrine, when must a cash-basis taxpayer recognize income? → When income is credited to the taxpayer's account or made available without restriction
5. Which Greeks measure an option's sensitivity to the passage of time? → Theta
6. Under US GAAP, research costs must be: → Expensed as incurred
7. When bootstrapping a zero-coupon yield curve from coupon bond prices, what is the key mathematical step? → Stripping future cash flows sequentially using already-derived discount factors
8. In a quantitative risk assessment, which metric measures the average loss expected from a risk event over a given time horizon? → Expected Loss (EL)
9. Which gradient boosting hyperparameter most directly controls the bias-variance trade-off in financial prediction models? → Maximum tree depth
10. Which approach best supports quality outcomes in Corporate Finance & Investment for Quantitative Finance Certification? → Systematic application of evidence-based methods
11. Which of the following correctly defines the moment generating function (MGF) of a random variable X? → M_X(t) = E[e^tX]
12. A portfolio has returns that follow a distribution with excess kurtosis of 3. How does this compare to a normal distribution? → It has heavier tails than normal
13. Which skill is most important for success in Financial Statement Analysis within Quantitative Finance Certification? → Continuous learning and adaptation
14. In the Black-Scholes model, increasing implied volatility has what effect on both call and put option prices? → Increases both
15. Under the Pecking Order Theory, firms prefer financing in which order? → Internal funds, then debt, then equity
16. Under Basel III operational risk guidelines, the Business Indicator Component (BIC) is calculated using which primary input? → The Business Indicator, a proxy for operational risk exposure based on P&L components
17. When a model risk control framework requires periodic model validation, what is the primary purpose of challenger models? → To provide an alternative benchmark that tests the champion model's assumptions
18. In performance attribution analysis, what does 'allocation effect' measure? → The impact of overweighting or underweighting sectors relative to the benchmark
19. In a multivariate normal distribution, if the covariance between two variables is zero, what can be concluded? → The variables are independent
20. Which inventory costing method results in the highest gross profit during a period of rising prices? → FIFO
21. What is the primary objective of liability-driven investing (LDI)? → Matching or immunizing assets against future liabilities
22. Under SEC Regulation SHO, a broker-dealer must locate shares before executing a short sale to prevent: → Naked short selling and failure-to-deliver situations
23. When evaluating mutually exclusive projects with different lives, the most appropriate technique is: → Equivalent Annual Annuity (EAA) method
24. In the context of principal component analysis (PCA), what does the first principal component represent? → The direction of maximum variance in the data
25. Which statement about stock buybacks versus dividends is MOST correct in a world with differential personal taxes? → Stock buybacks may be preferred if capital gains are taxed at a lower rate than dividends
26. Which asset class typically backs a Collateralized Loan Obligation (CLO)? → Leveraged corporate loans
27. Which valuation method is based on the present value of future cash flows? → Discounted Cash Flow (DCF) analysis
28. What is the first phase of strategic planning in Quantitative Finance Certification? → Situational analysis and goal setting
29. When an auditor concludes that a significant deficiency exists in internal controls, the required communication is to: → Management and the audit committee in writing
30. Which type of derivative contract is used to hedge against price fluctuations? → Futures contract