R Programming Language Certification Risk Assessment & Management 4

Question 1

Which R package and function performs stress testing by shocking factor exposures in a portfolio risk model?

Accepted Answer

FactorAnalytics::stress.test()

Answer

`FactorAnalytics::stress.test()` applies user-defined factor shocks to estimate stressed portfolio returns and losses.

Question 2

In R, what is the purpose of `copula::fitCopula()` in multivariate risk modeling?

Accepted Answer

To estimate the dependence structure between risk factors separately from their marginals

Answer

Copulas separate the marginal distributions of individual risk factors from their joint dependence structure, enabling flexible multivariate modeling.

Question 3

Which R function from the `qrmtools` package draws samples from a fitted copula for simulation-based risk aggregation?

Accepted Answer

rCopula()

Answer

`rCopula()` generates random variates from a specified copula object, used to simulate dependent risk factor scenarios.

Question 4

What R technique addresses the look-ahead bias problem when backtesting a risk model on historical data?

Accepted Answer

Rolling-window estimation using only past data at each evaluation point

Answer

Rolling-window estimation re-fits the model at each date using only data available up to that point, preventing future information from influencing past predictions.

Question 5

In R, the Kupiec test (`VaRTest()` in PerformanceAnalytics) evaluates VaR model accuracy by testing what?

Accepted Answer

Whether the observed exception frequency matches the expected VaR confidence level

Answer

The Kupiec proportion-of-failures test checks if the number of VaR breaches in a backtest is statistically consistent with the chosen confidence level.

R Programming Language Certification Practice Test

R Programming Language Certification Practice Test

R Programming Language Certification Risk Assessment & Management 4