01 What does ATR (average true range) measure?

Average daily volumeThe spreadInterest ratesThe average size of each bar's full range, including gaps

02 What is volatility clustering?

Calm periods tend to follow calm periods and turbulent ones follow turbulent onesVolatility rising every MondayOptions expiring togetherAll markets having the same volatility

03 What is the aim of volatility targeting?

Avoiding stopsTrading only volatile marketsSizing positions so each carries similar risk regardless of market volatilityPredicting volatility spikes

04 Why do many practitioners use only a fraction of Kelly, or avoid it?

It requires optionsIt is highly sensitive to overestimating an edge and can cause deep drawdownsIt is illegalIt only works for equities

05 An account falls 50%. What gain is needed to return to the starting balance?

150%75%100%50%

06 What tends to happen to correlations during market stress?

They stay constantThey fall to zeroThey often rise sharplyThey become negative everywhere

07 A trader buys EURUSD and GBPUSD. What is a large part of the combined exposure?

Long goldNo exposureA bet against the US dollarLong US dollar

08 A one-day 95% VaR of $1,000 implies that...

The account will gain $1,000The maximum possible loss is $1,000Losses never happenOn roughly one day in twenty, losses are expected to exceed $1,000

09 What does expected shortfall measure?

The spread costThe margin requirementThe best dayThe average loss on days when losses exceed the VaR threshold

10 Why are stress tests used alongside VaR?

They examine specific severe scenarios that statistical history may not describeThey are fasterRegulators forbid VaRThey replace position limits

Quiz: Quantitative Risk Management