The probability of rejecting a true null hypothesis that the tester is willing to accept, often 5%. It is the chance of a type I error.
Where you will meet it
Significance level comes up in 8 learning outcome notes across the FRM syllabus.
A few of them:
Hypothesis Testing FRM Part I · Quantitative analysis
“Failing to reject only means the data are not strong enough at the chosen significance level, and it never proves the null true.”
Backtesting VaR FRM Part II · Market risk measurement and management
“Its probability is the significance level, or for a fixed cut-off such as rejecting at 10 or more exceptions, the chance that a correct model produces that many exceptions by luck.”
Hypothesis Testing FRM Part I · Quantitative analysis
“The significance level α is then split into α ÷ 2 in each tail.”
Hypothesis Testing FRM Part I · Quantitative analysis
“Its probability is the size of the test, which equals the significance level α you chose.”
GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by Charta Learning, nor does it endorse any pass rates claimed by Charta Learning. Further, GARP is not responsible for any fees or costs paid by the user to Charta Learning. FRM® and GARP® are registered trademarks owned by the Global Association of Risk Professionals, Inc. The questions, explanations and study notes are written for this product and are not GARP curriculum material.