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