Reading 9: Common Probability Distributions - LOS l ～ Q4-6 likely, needed, following, simulation

mayanfang1

Q4. In which of the following cases would Monte Carlo simulation least likely be needed? Payoff of a:

A)   GNME.

B)   European option.

C)   roulette wheel.

Q5. Many analysts prefer to use Monte Carlo simulation rather than historical simulation because:

A)   past distributions cannot address changes in correlations or events that have not happened before.

B)   computers can manipulate theoretical data much more quickly than historical data.

C)   it is much easier to generate the required variables.

Q6. The difference between a Monte Carlo simulation and a historical simulation is that a historical simulation uses randomly selected variables from past distributions, while a Monte Carlo simulation:

A)     uses a computer to generate random variables.

B)   projects variables based on a priori principles.

C)   uses randomly selected variables from future distributions.

 

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