R Programming Language Certification Risk Assessment & Management 5

Question 1

In R, what does the `RiskMeasures::ES_tCopula()` approach model compared to Gaussian copula-based Expected Shortfall?

Accepted Answer

Heavier tail dependence, capturing larger joint losses in crisis scenarios

Answer

Student-t copulas have tail dependence, meaning extreme losses are more likely to co-occur, producing larger ES estimates than Gaussian copulas.

Question 2

Which R function computes the Herfindahl-Hirschman Index (HHI) relevant to concentration risk in a portfolio?

Accepted Answer

sum(weights^2) where weights are portfolio weight fractions

Answer

HHI is the sum of squared portfolio weights; a higher value indicates greater concentration risk in fewer positions.

Question 3

When using `dplyr` for risk data aggregation, which function correctly computes group-level CVaR across scenarios?

Accepted Answer

group_by(scenario) %>% summarise(cvar = mean(loss[loss > quantile(loss, 0.95)]))

Answer

CVaR at 95% is the mean of losses exceeding the 95th percentile, computed within each scenario group using `group_by` and `summarise`.

Question 4

In R's `quantreg` package, what is the advantage of quantile regression over OLS regression for risk factor modeling?

Accepted Answer

It estimates the effect of predictors at specific quantiles of the outcome, capturing tail behavior

Answer

Quantile regression models the conditional quantiles of the response, making it suitable for analyzing extreme outcomes in the tails of a loss distribution.

Question 5

Which R idiom correctly implements importance sampling to estimate a rare-event probability more efficiently than naive Monte Carlo?

Accepted Answer

Simulate under a shifted distribution g, then weight samples by f(x)/g(x)

Answer

Importance sampling draws from a proposal distribution that makes the rare event more likely, then corrects with likelihood ratio weights to get unbiased estimates.

R Programming Language Certification Practice Test

R Programming Language Certification Practice Test

R Programming Language Certification Risk Assessment & Management 5