hard · FRM Part 1 Quantitative Analysis
A fraud detection algorithm has a prior probability of fraud on any transaction of 0.1%. The algorithm triggers a 'Level 1' alert with 80% sensitivity and 2% false-positive rate. Upon manual review, a 'Level 2' suspicious pattern is identified with 90% sensitivity and 5% false-positive rate. Assuming signals are conditionally independent, find the final probability of fraud.
- 41.98%
- 3.85%
- 72.00%
- 1.00%
Sign up free to see the explanation and track your rank →
More FRM Part 1 Quantitative Analysis practice
- What is the probability that the business line experiences exactly two events in a given y
- A single discrete trial that results in exactly one of two possible outcomes (success or f
- A probability distribution that is asymmetric and has a significantly long tail extending
- How does the mean of a lognormal distribution compare to the mean of its associated normal
- How many parameters are required to fully define its shape and location?
- Which of the following methods would most effectively mitigate this issue?
- In combinatorics, which coefficient represents the number of ways to select r items from a
- A 3 × 3 correlation matrix has eigenvalues λ_1 = 1.5, λ_2 =… — What does this indicate abo