CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

Which factor is THE LEAST IMPORTANT factor for a Monte Carlo method to estimate the true value of a security?
A. The number of paths.
B. The valuation model itself.
C. The accuracy of inputs.
Explanation: The method is only as good as the valuation model used and the accuracy of the inputs.

User Contributed Comments 1

User Comment
myron The statistical distribution is estimated for each input (e.g. interest rate). Then, simulations are run to see how constantly changing inputs (based on their distribution) affect the bond price. The bond prices are averaged to find the estimated bond price.
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