2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

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(21/12) MScFE 630 Computational Finance (C21-S2)

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Module 2: Simulations and Monte Carlo Methods in Python for Option Pricing /
Practice Quiz M2 (Ungraded)

Started on Monday, 14 February 2022, 6:55 AM

State Finished
Completed on Monday, 14 February 2022, 7:02 AM
Time taken 6 mins 55 secs

https://masters.wqu.edu/mod/quiz/review.php?attempt=399580&cmid=71598 1/9
2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

Question 1

Complete

Not graded

What distribution do we sample from to simulate stock prices?

Select one:
Exponential distribution
Financial distribution
Binomial distribution
Uniform distribution
Normal distribution

Your answer is correct.

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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

Question 2

Complete

Not graded

Why do we not use the true underlying variance in studying our Monte Carlo estimate?

Select one:
None of the above
We do not know it
The Central Limit Theorem does not include it
We do not need to examine variance
Sample variance is more accurate

Your answer is correct.

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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

Question 3

Complete

Not graded

The inverse transform method utilizes which property of a random variable?

Select one:
Density function
Moment generating function
Cumulative distribution function
Characteristic function
None of the above

Your answer is correct.

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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

Question 4

Complete

Not graded

Consider the following code:

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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review


The random library is used in which line?

Select one:
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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

Line 4
Line 7
Line 9
Line 13
None of the above

Your answer is incorrect.

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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review

Question 5

Complete

Not graded

What is the formula for the terminal stock price under geometric Brownian motion (under the pricing measure)? Note:

𝑆𝑡

is the share price at time

is the average share return,

is the risk-free interest rate,

is the volatility of the share,

is the term and

𝑊𝑡

is a standard Brownian Motion.

Select one:

2
𝜎
𝑆𝑇 = 𝑆0 exp((𝜇 − )𝑇 + 𝜎𝑊 𝑇 )
2

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2/14/22, 6:02 AM Practice Quiz M2 (Ungraded): Attempt review
2
𝜎
𝑆𝑇 = 𝑆0 exp((𝑟 − )𝑇 + 𝑊 𝑇 )
2

2
𝑆𝑇 = 𝑆0 exp((𝑟 − 𝜎 )𝑇 + 𝜎𝑊 𝑇 )

2
𝜎
𝑆𝑇 = exp((𝜇 − )𝑇 + 𝜎𝑊 𝑇 )
2

2
𝜎
𝑆𝑇 = 𝑆0 exp((𝑟 − )𝑇 + 𝜎𝑊 𝑇 )
2

Your answer is correct

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