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| Section | Objectives |
|---|---|
| Credit Derivatives and Securitization | - Credit derivatives instruments - Securitization structures and process |
| Modern Credit Risk Modeling | - Credit VaR and loss distribution simulation - PD/LGD modeling frameworks |
| Credit Portfolio Management | - Portfolio credit risk measurement - Risk concentration and diversification |
| Counterparty Risk | - Definition and sources of counterparty risk - Mitigation techniques (netting, collateral) |
| SA-CCR and Regulatory Frameworks | - Standardized Approach for Counterparty Credit Risk |
| Classic Credit Risk | - Credit risk methodology
|
| CVA and DVA | - Measurement and interpretation - Valuation adjustments |
1. Under the KMV Moody's approach to credit risk measurement, which of the following expressions describes the expected 'default point' value of assets at which the firm may be expected to default?
A) Short term debt + 0.5* Long term debt
B) Short term debt + Long term debt
C) 2* Short term debt + Long term debt
D) Long term debt + 0.5* Short term debt
2. A stock's volatility under EWMA is estimated at 3.5% on a day its price is $10. The next day, the price moves to $11. What is the EWMA estimate of the volatility the next day? Assume the persistence parameter # = 0.93.
A) 0.0018
B) 0.0224
C) 0.0429
D) 0.0421
3. Pick underlying risk factors for a position in an equity index option:
I. Spot value for the index
II. Risk free interest rate
III. Volatility of the underlying
IV. Strike price for the option
A) I, II and III
B) II and II
C) All of the above
D) I and IV
4. Conditional VaR refers to:
A) expected average losses above a given VaR estimate
B) expected average losses conditional on the VaR estimates not being exceeded
C) value at risk when certain conditions are satisfied
D) the value at risk estimate for non-normal distributions
5. Under the CreditPortfolio View model of credit risk, the conditional probability of default will be:
A) lower than the unconditional probability of default in an economic expansion
B) the same as the unconditional probability of default in an economic expansion
C) lower than the unconditional probability of default in an economic contraction
D) higher than the unconditional probability of default in an economic expansion
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: D | Question # 3 Answer: A | Question # 4 Answer: A | Question # 5 Answer: A |
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