JPMorgan Chase & Co. Quantitative Analyst Interview Questions and Answers

VaR stands for Value at Risk, a measure used to estimate the potential loss in value of a portfolio over a specified time period under normal market conditions.

• VaR is calculated by determining the maximum potential loss within a specified confidence level over a given time horizon.

• There are different methods to calculate VaR, including historical simulation, parametric method, and Monte Carlo simulation.

• For example, th...read more

VaR for bonds can be calculated using historical simulation, parametric method, or Monte Carlo simulation.

• Historical simulation involves using historical data to calculate potential losses.

• Parametric method uses statistical techniques to estimate potential losses based on assumptions about the distribution of bond returns.

• Monte Carlo simulation involves generating multiple scenarios and calculating potential losses in ...read more

Yield is not the same as coupon. Yield is the return on investment, taking into account the current market price of the bond.

• Yield is the return on investment for a bond, taking into account the current market price.

• Coupon is the fixed interest rate paid by the bond issuer to the bondholder.

• Yield can be higher or lower than the coupon rate, depending on the bond's current market price.

• For example, a bond with a $1,000 ...read more

To quantify if an OLS is the best fit, one can use metrics like R-squared, adjusted R-squared, AIC, BIC, and F-statistic.

• Calculate the R-squared value - a higher R-squared indicates a better fit

• Calculate the adjusted R-squared value - it penalizes for adding unnecessary variables

• Check the AIC and BIC values - lower values indicate a better fit

• Analyze the F-statistic - a significant F-statistic suggests the model is a g

Use statistical tests like Kolmogorov-Smirnov test or Anderson-Darling test to compare the distributions of the two time series models.

• Apply Kolmogorov-Smirnov test to compare the cumulative distribution functions of the two time series models.

• Use Anderson-Darling test to compare the empirical distribution functions of the two time series models.

• Plot histograms of the two time series models and visually inspect for sim

Duration adjustment can be positive or negative depending on the direction of interest rate movement.

• Duration adjustment is positive when interest rates decrease, leading to an increase in bond prices.

• Duration adjustment is negative when interest rates increase, resulting in a decrease in bond prices.

• Investors use duration adjustment to hedge against interest rate risk in their portfolios.