Free Preparation Discussions
MENU
PRMIA Exam 8010 Topic 3 Question 54 Discussion
Topic #: 3
Which of the following objectives are targeted by rating agencies when assigning ratings:
1. Ratings accuracy
2. Ratings stability
3. High accuracy ratio (AR)
4. Ranked ratings
The persistence parameter, , is the coefficient of the prior day's variance in EWMA calculations. A higher value of the persistence parameter tends to 'persist' the prior value of variance for longer. Consider an extreme example - if the persistence parameter is equal to 1, the variance under EWMA will never change in response to returns.
1 - is the coefficient of recent market returns. As is lowered, 1 - increases, giving a greater weight to recent market returns or shocks. Therefore, as is lowered, the model will react faster to market shocks and give higher weights to recent returns, and at the same time reduce the weight on prior variance which will tend to persist for a shorter period.
Dorinda
1 months agoFrancoise
6 days agoAlison
1 months agoCarey
2 days agoViki
9 days agoTarra
22 days agoLawrence
1 months agoErick
5 days agoVirgilio
6 days agoFiliberto
9 days agoJani
2 months agoThaddeus
2 months agoAntione
21 days agoJutta
22 days agoRosalyn
28 days agoOretha
1 months agoSabine
1 months agoKaron
1 months agoEveline
2 months agoBulah
2 months agoBong
2 months ago