ARM 401 EXAM (Vocabulary) with Questions & Answers
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Course
ARM 401
Institution
ARM 401
Risk priority number (RPN) - The product of rankings for consequence, occurrence, and detection
used to identify critical failure modes when assessing risk within a design or process.
Fault tree analysis (FTA) - An analysis that takes a particular system failure and traces the
events leading to ...
ARM 401 EXAM (Vocabulary) with
Questions & Answers
Risk priority number (RPN) - ✔✔The product of rankings for consequence, occurrence, and detection
used to identify critical failure modes when assessing risk within a design or process.
Fault tree analysis (FTA) - ✔✔An analysis that takes a particular system failure and traces the
events leading to the system failure backwards in time.
Root cause - ✔✔The event or circumstance that directly leads to an occurrence.
Probability analysis - ✔✔A technique for forecasting events, such as accidental and business
losses, on the assumption that they are governed by an unchanging probability distribution.
Probability distribution - ✔✔A presentation (table, chart, or graph) of probability estimates of
a particular set of circumstances and of the probability of each possible outcome.
Theoretical probability - ✔✔Probability that is based on theoretical principles rather than on
actual experience.
Empirical probability (a posteriori probability) - ✔✔A probability measure that is based on
actual experience through historical data or from the observation of facts.
Law of large numbers - ✔✔the larger the number of individuals that are randomly drawn from
a population, the more representative the resulting group will be of the entire population
Value at risk (VaR) - ✔✔A technique to quantify financial risk by measuring the likelihood of
losing more than a specific dollar amount over a specific period of time.
Earnings at risk (EaR) - ✔✔A technique to assess earnings volatility by measuring the likelihood
that earnings will be below a specific dollar amount over a specific period of time.
, Conditional value at risk (CVaR) - ✔✔A technique to quantify the likelihood of losing a specific dollar
amount that exceeds the VaR threshold.
Monte Carlo simulation - ✔✔a risk analysis technique in which probable future events are
simulated on a computer, generating estimated rates of return and risk indexes
Trend analysis - ✔✔hypothetical extension of a past series of events into the future
Regression analysis - ✔✔A statistical technique that is used to estimate relationships
between variables.
Linear regression analysis - ✔✔a form of statistical analysis that seeks the equation for the
straight line that best describes the relationship between two ratio variables
Economic data - ✔✔Data regarding interest rates, asset prices, exchange rates, the Consumer
Price Index, and other information about the global, the national, or a regional economy.
Predictive model - ✔✔a model used to predict an unknown outcome by means of a defined target
variable
Target variable - ✔✔The predefined attribute whose value is being predicted in a data
analytical model
Overfitting - ✔✔The process of fitting a model too closely to the training data for the model to
be effective on other data.
Accuracy - ✔✔A description of how close a measurement is to the true value of the
quantity measured.
Precision - ✔✔In model performance evaluation, a model's correct positive predictions divided by
its total positive predictions.
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