Standard error

The standard deviation of an estimator, showing how much the estimate would vary from sample to sample. It falls as the sample grows.

Where you will meet it

Standard error comes up in 27 learning outcome notes across the FRM syllabus. A few of them:

• Mortgages and Mortgage-Backed Securities
  FRM Part I · Financial markets and products

  “Standard error falls with the square root of the number of paths.”

• Sample Moments
  FRM Part I · Quantitative analysis

  “Before the data are drawn its value is uncertain, so it has a sampling distribution with an expected value, a variance and a standard error.”

• The Black-Scholes-Merton Model
  FRM Part I · Valuation and risk models

  “The standard error of a volatility estimated from n returns is roughly σ divided by the square root of 2n.”

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

  “To test a factor, use the ratio of the coefficient to its standard error, which gives the t-statistic.”

See also

Standard deviation

All terms beginning with S · FRM glossary

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