ThatQuiz Test Library Take this test now
Computational finance
Contributed by: Leonard
  • 1. Computational finance is a multidisciplinary field that combines financial theory, mathematical modeling, and computer science to analyze and solve complex financial problems. By utilizing advanced algorithms and computational techniques, practitioners in computational finance can develop quantitative models for pricing derivatives, managing risk, and optimizing investment portfolios. This field plays a crucial role in modern finance, enabling financial institutions to make data-driven decisions, forecast market trends, and develop innovative financial products. With the rapid advancement of technology and data analytics, computational finance continues to evolve and drive innovation in financial markets worldwide.

    In finance, what does the term 'P/E ratio' stand for?
A) Performance-to-Expense ratio
B) Profit-to-Equity ratio
C) Price-to-Earnings ratio
D) Production-to-Expenditure ratio
  • 2. Which financial concept implies that an investment can earn interest on interest over time?
A) Compound interest
B) Simple interest
C) Amortization
D) Net present value
  • 3. Which statistical measure is commonly used to assess the volatility of a financial asset?
A) Median
B) Mode
C) Mean
D) Standard deviation
  • 4. What is the CAPM model used for in finance?
A) To determine government bond yields
B) To calculate the expected return on an investment based on its risk
C) To analyze consumer spending patterns
D) To predict currency exchange rates
  • 5. What does 'DCF' stand for in relation to financial valuation?
A) Discounted Cash Flow
B) Dynamic Cash Flow
C) Diversified Currency Fund
D) Direct Corporate Financing
  • 6. What does the 'Sharpe ratio' measure in finance?
A) Debt-to-Equity ratio of a company
B) Liquidity of an asset
C) Risk-adjusted return on an investment
D) Market capitalization
  • 7. When is the 'Stochastic process' commonly used in computational finance?
A) To predict currency exchange rates accurately
B) To determine long-term stock price movements
C) To model random fluctuations in financial markets over time
D) To analyze fixed income securities
  • 8. What does 'Liquidity risk' refer to in finance?
A) The risk of changes in interest rates affecting investment value
B) The inability to sell an asset without incurring a loss
C) The risk of unexpected changes in market regulations
D) The likelihood of default on a loan
  • 9. Which programming language is commonly used in computational finance?
A) C++
B) Python
C) Java
D) Ruby
  • 10. When is the 'Mark-to-Market' accounting method used in finance?
A) To assess historical financial performance
B) To predict future market trends
C) To determine long-term fixed asset values
D) To value assets based on their current market prices
  • 11. What is 'Volatility smile' in options trading?
A) The concept of guaranteed profits in trading
B) A strategy to avoid market fluctuations
C) The pattern of implied volatility levels across different strike prices of options
D) A term used for high-frequency trading algorithms
  • 12. What is the main objective of the 'Black-Litterman Model' in portfolio management?
A) To predict short-term stock price movements
B) To maximize dividend payouts
C) To eliminate all investment risk
D) To combine market equilibrium with investor views to enhance asset allocation
  • 13. What is the primary purpose of the 'Efficient Frontier' in portfolio analysis?
A) To determine the market capitalization of different sectors
B) To show the optimal portfolios that offer the highest expected return for a given level of risk
C) To identify undervalued stocks
D) To predict interest rate fluctuations
  • 14. In finance, what does the term 'Leverage' refer to?
A) The total market value of a company's outstanding shares
B) The degree of influence a shareholder has on company decisions
C) Using borrowed capital to increase potential return on an investment
D) The process of determining a company's credit rating
  • 15. In computational finance, what does 'Backtesting' involve?
A) Simulating future market conditions for investment decisions
B) Conducting due diligence before a potential merger
C) Validating real-time stock market orders
D) Testing a trading strategy using historical data to assess its viability
Created with That Quiz — where test making and test taking are made easy for math and other subject areas.