Extreme Events – Specimen Question A.6.1
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Question and Answer Summary
A daily series that you are analysing seems to have a small
number of extreme movements that look suspiciously like errors to you.
(a) To what extent
should you exclude such observations when developing a robust portfolio
construction algorithm?
Answer/Hints
(b) What sorts of circumstances
(applying to what sorts of financial series) might lead to extreme movements
that are not actually errors?
Answer/Hints
(c) What other sorts
of observations arising in financial series might be ones that you would
question?
Answer/Hints
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