What is Likelihood-ratio test in FRM Part 1?

A test comparing the maximized likelihood of a restricted model with that of a less restricted alternative. The statistic measures how much fit is lost by imposing the null restrictions and often has an asymptotic chi-square distribution.

Likelihood-ratio test

FRM Part 1 glossary · Quantitative Analysis

Definition

A test comparing the maximized likelihood of a restricted model with that of a less restricted alternative.

Likelihood-ratio test in plain English

The statistic measures how much fit is lost by imposing the null restrictions and often has an asymptotic chi-square distribution.

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Value at risk (VaR)

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Related FRM Part 1 terms

Bayes' theorem
Bootstrapping (term structure)
Central limit theorem
Copula
Exponentially weighted moving average (EWMA)
Generalized Autoregressive Conditional Heteroskedasticity (GARCH)
Heteroskedasticity
Monte Carlo simulation
Ordinary least squares (OLS)
p-value

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