QUESTION NO: 1
As an example of the balance sheet effect, if rates rise, Delta Bank can expect:
As an example of the balance sheet effect, if rates rise, Delta Bank can expect:
Correct Answer: B
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QUESTION NO: 2
Forward rate agreements (FRA) are:
Forward rate agreements (FRA) are:
Correct Answer: B
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QUESTION NO: 3
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations.
These CDOs can be used in a repurchase transaction at a 20% haircut. Starting with $100 worth of CDOs, which one of the following four positions would completely utilize the available leverage?
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations.
These CDOs can be used in a repurchase transaction at a 20% haircut. Starting with $100 worth of CDOs, which one of the following four positions would completely utilize the available leverage?
Correct Answer: D
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QUESTION NO: 4
The retail banking business of BankGamma has an expected P & L of $50 million and a VaR of $100 million.
The bank seeks to diversify its revenue, and is considering the opportunity to acquire a credit card business with an expected P & L of $50 million and a VaR of $150 million. What will be the overall RAROC if the bank acquires the new business?
The retail banking business of BankGamma has an expected P & L of $50 million and a VaR of $100 million.
The bank seeks to diversify its revenue, and is considering the opportunity to acquire a credit card business with an expected P & L of $50 million and a VaR of $150 million. What will be the overall RAROC if the bank acquires the new business?
Correct Answer: A
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QUESTION NO: 5
Which one of the following statements accurately describes market risk tolerance?
Which one of the following statements accurately describes market risk tolerance?
Correct Answer: B
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QUESTION NO: 6
A trader inadvertently booked a trade with incorrect information. A subsequent market move resulted in a profit for the bank. Why should the bank include this gain in its operational risk assessment process?
A trader inadvertently booked a trade with incorrect information. A subsequent market move resulted in a profit for the bank. Why should the bank include this gain in its operational risk assessment process?
Correct Answer: B
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QUESTION NO: 7
Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?
Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?
Correct Answer: A
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QUESTION NO: 8
Which one of the following four regulatory drivers for operational risk management includes risk and control requirements for financial statements in the United States?
Which one of the following four regulatory drivers for operational risk management includes risk and control requirements for financial statements in the United States?
Correct Answer: C
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QUESTION NO: 9
To hedge equity exposure without buying or selling shares of stock or otherwise rebalancing the portfolio, a risk manager could initiate
To hedge equity exposure without buying or selling shares of stock or otherwise rebalancing the portfolio, a risk manager could initiate
Correct Answer: D
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QUESTION NO: 10
Which statements correctly describe the features of using subscription databases for operational loss data analysis?
Subscription databases
I. Provide central data repositories and benchmarking services to their members.
II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.
III. Assist with mapping the events to the appropriate business lines, risk categories and causes.
IV. Reflect only events that are interesting to the press and are reported in the press.
Which statements correctly describe the features of using subscription databases for operational loss data analysis?
Subscription databases
I. Provide central data repositories and benchmarking services to their members.
II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.
III. Assist with mapping the events to the appropriate business lines, risk categories and causes.
IV. Reflect only events that are interesting to the press and are reported in the press.
Correct Answer: B
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QUESTION NO: 11
When considering the advantages of operational risk function owned by the Chief Compliance Officer in a financial institution, an operational risk manager consultant suggests that this governance approach will have all of the following advantages except:
When considering the advantages of operational risk function owned by the Chief Compliance Officer in a financial institution, an operational risk manager consultant suggests that this governance approach will have all of the following advantages except:
Correct Answer: A
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QUESTION NO: 12
Gamma Bank estimates its monthly portfolio volatility at 5%.The portfolio's annual volatility is closest to which of the following?
Gamma Bank estimates its monthly portfolio volatility at 5%.The portfolio's annual volatility is closest to which of the following?
Correct Answer: A
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QUESTION NO: 13
Over a long period of time DeltaBank has amassed a large equity option position. Which of the following risks should be considered in this transaction?
I). Counterparty risk on long OTC option positions
II). Counterparty risk on short OTC option positions
III). Counterparty risk on long exchange-traded option positions
IV). Counterparty risk on short exchange-traded option positions
Over a long period of time DeltaBank has amassed a large equity option position. Which of the following risks should be considered in this transaction?
I). Counterparty risk on long OTC option positions
II). Counterparty risk on short OTC option positions
III). Counterparty risk on long exchange-traded option positions
IV). Counterparty risk on short exchange-traded option positions
Correct Answer: C
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QUESTION NO: 14
To estimate the responsiveness of a particular equity portfolio to the overall market, a trader should use the portfolio's
To estimate the responsiveness of a particular equity portfolio to the overall market, a trader should use the portfolio's
Correct Answer: D
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