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PRMIA Exam 8010 Topic 1 Question 31 Discussion
Topic #: 1
Which of the following statements are correct?
1. A reliance upon conditional probabilities and a-priori views of probabilities is called the 'frequentist' view
2. Knightian uncertainty refers to things that might happen but for which probabilities cannot be evaluated
3. Risk mitigation and risk elimination are approaches to reacting to identified risks
4. Confidence accounting is a reference to the accounting frauds that were seen in the past decade as a reflection of failed governance processes
The change in the price of a security that follows a Weiner process is determined by its standard deviation and expected return. To get the price itself, we need to add this change in price to the current price. Therefore the future price in a Weiner process is determined by all three of current price, expected return and standard deviation.
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