Critical value

The threshold that a test statistic must pass for the null hypothesis to be rejected. It depends on the significance level and the distribution used.

Where you will meet it

Critical value comes up in 12 learning outcome notes across the FRM syllabus. A few of them:

• Hypothesis Testing
  FRM Part I · Quantitative analysis

  “A confidence interval and a hypothesis test use the same ingredients: the estimate, its standard error and a critical value.”

• The Global Drivers of Private Credit
  FRM Part II · Current issues in financial markets

  “At a 5 percent two-sided level the critical value is about 1.96.”

• Backtesting VaR
  FRM Part II · Market risk measurement and management

  “It is chi-square with 2 degrees of freedom, with 5 percent critical value 5.99.”

• Hypothesis Testing
  FRM Part I · Quantitative analysis

  “Second, choose the significance level and critical value.”

See also

Hypothesis test · Significance level

All terms beginning with C · FRM glossary

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