有关Quotes

问题如下：

A quantitative analyst at a foreign exchange (FX) trading company is developing a new factor model to be used for estimating potential risk exposures on FX trades. The analyst is evaluating potential factors to use in the model, and their effects on the performance of the model. Which of the following statements is most likely correct for the analyst to consider when developing the model?

选项：

A.

Using a large number of underlying factors will allow the model to correctly predict future exchange rates.

B.

The most important factor in predicting a country’s interest rates is the political stability of the country.

C.

The pair-wise exchange rates for currencies of developed countries can be assumed to be constant for terms shorter than 3 months.

D.

The value of a country’s currency will be negatively correlated with a factor representing changes in that country’s money supply.

解释：

D is correct. As described on p. 116, “If Country A increases its money supply by 25%

while Country B keeps its money supply unchanged, the value of Country A’s currency will

tend to decline by 25% relative to Country B’s currency.”

A is incorrect. Future exchange rates cannot be predicted with any precision.

B is incorrect. While political instability would weaken a currency, supply and demand are

the most important factors.

C is incorrect. Exchange rates should be assumed to change even in short-term time horizons.