A credit portfolio manager analyzes a large retail credit portfolio. Which of the following factors will represent
typical disadvantages of market-linked credit risk drivers?
I. Need to supply a large number of input parameters to the model
II. Slow computation speed due to higher simulation complexity
III. Non-linear nature of the model applicable to a specific type of credit portfolios
IV. Need to estimate a large number of unknown variable and use approximations
A large multinational bank is concerned that their duration measures may not be accurate since the yield curve
shifts are not parallel. Which of the following statements would be typically observed regarding variability of
Which one of the following four statements regarding commodity exchanges is INCORRECT?
Which of the following assets on the bank's balance sheet has greatest endogenous liquidity risk?
An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she
can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___
risk on the contract and always receives a premium.
Which of the following risk types are historically associated with credit derivatives?
I. Documentation risk
II. Definition of credit events
III. Occurrence of credit events
IV. Enterprise risk
Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?
Which one of the following changes would typically increase the price of a fixed income instrument, such as a
Which one of the following four mathematical option pricing models is used most widely for pricing European
Which one of the following four statements correctly defines chooser options?
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:
By foreign exchange market convention, spot foreign exchange transactions are to be exchanged at the spot
date based on the following settlement rule:
DeltaFin wants to develop a control scoring method for its RCSA program. Which of the following statements
regarding scoring methods are correct?
I. DeltaFin can develop a control scoring method that assesses both the design and the performance of the
II. DeltaFin can combine the design and performance scores for each control to produce an overall control
III. DeltaFin can use the control performance scores to compute an overall risk severity score.
IV. DeltaFin can determine its own appropriate control scoring method.
A portfolio manager is interested in computing risk measures for his bond investment portfolio. Which of the
following measures the sensitivity of duration to interest rates?
The probability of default on a bond is 3%, and in the case of default, investors expect to lose 70% of their
investment. The bond's risk premium is 1.9%. The expected loss and the credit spread of the bond are,
James Arthur is a customer of a bank who has taken a floating rate loan from the bank. He is concerned that
the rates may rise in the future increasing his payment amount. Which of the following instruments should he
buy to hedge against the rise in interest rates?
An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.
10 basis points are equal to:
Normally, commercial banking can be viewed as a fixed income carry trade since
The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:
In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may
borrow up to ___ of the value of the securities from their brokers.
Which one of the following four statements about equity indices is INCORRECT?
Which one of the following four statements correctly identifies disadvantages of using the economic capital?
From a risk point of view, which of the following factors will generally lead to the fluctuation of equity values
with industry P/E levels and a company's individual earnings?
II. Cost management
III. Commercial success of the company
IV. Market sentiment
Which of the following are the most common methods to increase liquidity in stressed conditions?
I. Selling or securitizing assets.
II. Obtaining additional credit lines.
III. Securing a better credit rating.
A bank has a large number of auto loans and would prefer to sell them to raise cash for more funding.
However, selling individual auto loans is difficult. What could the bank do?
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan
also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's
expected loss be? What is the expected loss of this loan?
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
Altman's Z-score incorporates all the following variables that are predictive of bankruptcy EXCEPT: