QUESTION NO: 1
Bank Sigma takes a long position in the oil futures market that requires a 2% margin, i.e., the bank has to deposit 2% of the value of the contract with the broker. The futures contracts were priced at $50 per barrel (bbl) at inception, and rose by $5 to $55. The VaR on the position is estimated to be $10. What is the return on this transaction on a risk adjusted basis?
Bank Sigma takes a long position in the oil futures market that requires a 2% margin, i.e., the bank has to deposit 2% of the value of the contract with the broker. The futures contracts were priced at $50 per barrel (bbl) at inception, and rose by $5 to $55. The VaR on the position is estimated to be $10. What is the return on this transaction on a risk adjusted basis?
Correct Answer: A
Vote an answer
QUESTION NO: 2
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a result it ___ return on equity for the bank.
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a result it ___ return on equity for the bank.
Correct Answer: B
Vote an answer
QUESTION NO: 3
Arnold Wu owns a floating rate bond. He is concerned that the rates may fall in the future decreasing his payment amount. Which of the following instruments should he buy to hedge against the fall in interest rates?
Arnold Wu owns a floating rate bond. He is concerned that the rates may fall in the future decreasing his payment amount. Which of the following instruments should he buy to hedge against the fall in interest rates?
Correct Answer: B
Vote an answer
QUESTION NO: 4
Gamma Bank is operating in a highly volatile interest rate environment and wants to stabilize its net income by shifting the sources of its earnings from interest rate sensitive sources to less interest rate sensitive sources. All of the following strategies can help achieve this objective EXCEPT:
Gamma Bank is operating in a highly volatile interest rate environment and wants to stabilize its net income by shifting the sources of its earnings from interest rate sensitive sources to less interest rate sensitive sources. All of the following strategies can help achieve this objective EXCEPT:
Correct Answer: D
Vote an answer
QUESTION NO: 5
Normally, commercial banking can be viewed as a fixed income carry trade since
Normally, commercial banking can be viewed as a fixed income carry trade since
Correct Answer: D
Vote an answer
QUESTION NO: 6
Which of the following statements explain how securitization makes the retail assets highly liquid and the balance sheet easier to manage?
I. By securitizing assets any lack of capital can be accommodated by selling the securitized bonds.
II. Any need to diversify credit risk can be achieved by selling bank's own securitized bonds and buying other bonds that increase diversification.
III.
Securitization could be used to promote hedging by using limited market instruments.
Which of the following statements explain how securitization makes the retail assets highly liquid and the balance sheet easier to manage?
I. By securitizing assets any lack of capital can be accommodated by selling the securitized bonds.
II. Any need to diversify credit risk can be achieved by selling bank's own securitized bonds and buying other bonds that increase diversification.
III.
Securitization could be used to promote hedging by using limited market instruments.
Correct Answer: C
Vote an answer
QUESTION NO: 7
In additional to the commodity-specific risks, which of the following risks represent the main commodity derivative risks?
I. Basis
II. Term
III. Correlation
IV.
Seasonality
In additional to the commodity-specific risks, which of the following risks represent the main commodity derivative risks?
I. Basis
II. Term
III. Correlation
IV.
Seasonality
Correct Answer: A
Vote an answer
QUESTION NO: 8
Which of the following attributes are typical for early models of statistical credit analysis?
Which of the following attributes are typical for early models of statistical credit analysis?
Correct Answer: D
Vote an answer
QUESTION NO: 9
A risk manager is considering how to best quantify option price dynamics using mathematical option pricing models. Which of the following variables would most likely serve as an input in these models?
I. Implicit parameter estimate based on observed market prices
II. Estimates of sensitivity of option prices to parameter changes
III.
Theoretical option determination based on assumptions
A risk manager is considering how to best quantify option price dynamics using mathematical option pricing models. Which of the following variables would most likely serve as an input in these models?
I. Implicit parameter estimate based on observed market prices
II. Estimates of sensitivity of option prices to parameter changes
III.
Theoretical option determination based on assumptions
Correct Answer: C
Vote an answer
QUESTION NO: 10
Which one of the following four statements on the seniority of corporate bonds is incorrect?
Which one of the following four statements on the seniority of corporate bonds is incorrect?
Correct Answer: C
Vote an answer
QUESTION NO: 11
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?
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?
Correct Answer: A
Vote an answer
QUESTION NO: 12
AlphaBank estimates that the annualized standard deviation of its portfolio returns equal 30%; The daily volatility of the portfolio is closest to which of the following?
AlphaBank estimates that the annualized standard deviation of its portfolio returns equal 30%; The daily volatility of the portfolio is closest to which of the following?
Correct Answer: D
Vote an answer
QUESTION NO: 13
Which one of the following four statements about market risk is correct? Market risk is
Which one of the following four statements about market risk is correct? Market risk is
Correct Answer: D
Vote an answer
QUESTION NO: 14
To estimate a partial change in option price, a risk manager will use the following formula:
To estimate a partial change in option price, a risk manager will use the following formula:
Correct Answer: C
Vote an answer
QUESTION NO: 15
To improve the culture and awareness of the operational risk, Gamma Bank's CRO decides to promote three activities within her organization. Which one of the following four activities is NOT typically used to develop an operational risk framework?
To improve the culture and awareness of the operational risk, Gamma Bank's CRO decides to promote three activities within her organization. Which one of the following four activities is NOT typically used to develop an operational risk framework?
Correct Answer: D
Vote an answer