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Which one of the following four statements presents a challenge of using external loss databases in the operational risk framework?
Which one of the following four statements presents a challenge of using external loss databases in the operational risk framework?A . Use of benchmarked data reflects similar data collection standards.B . External events are usually not of interest to senior management.C . If the external data is gathered from news...
Which one of the following four option types would most likely meet these specific foreign currency demands?
A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off based on the average price of the underlying asset on either a few specific chosen dates or all dates within a specific pricing window. Which one of the following four option types...
Which of the following are among the main uses of risk reports?
Which of the following are among the main uses of risk reports? I. Identification of exceptional situations that require managerial attention. II. Display the relative risk among different trades. III. Specify how RAROC will be maximized within the bank. IV. Estimate the overall risk levels of the bank.A . I,...
Bank customers traditionally trade commodity futures with banks in order to achieve which of the following goals?
Bank customers traditionally trade commodity futures with banks in order to achieve which of the following goals? I. To express their own price views II. To reverse undesired short-term exposure created from fixed commodity sales III. To reach short-term budgetary targetsA . IB . IIC . I, IIID . I,...
James Johnson bought a coupon bond yielding 4.7% for $1,000.
James Johnson bought a coupon bond yielding 4.7% for $1,000. Assuming that the price drops to $976 when yield increases to 4.71%, what is the PVBP of the bond.A . $26.B . $76.C . $870.D . $976.View AnswerAnswer: A Explanation: The PVBP (Present Value of a Basis Point) can be...
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?A . AAAB . AAC . AD . BView AnswerAnswer: C Explanation: Beta Insurance Company, which can only invest in investment-grade...
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while the risk of loss to the other large bank will increase.
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As prices fluctuate in either direction, one large bank will require additional collateral from the small...
What is a common implicit assumption that is made when computing VaR using parametric methods?
What is a common implicit assumption that is made when computing VaR using parametric methods?A . The expected returns are constant, but the standard deviation changes over time.B . The standard deviations of returns are constant, but the mean changes over time.C . The mean of and the standard deviations...
The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential
The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential failure of a borrower to fulfill its payment requirements, which include both the repayment of the amount borrowed, the principal and the contractual interest payments, would be called ___.A . Credit risk; market...
Which one of the following four approaches should the management choose to achieve this strategic goal?
AlphaBank's management is evaluating how changes in its business environment could materially impact risk categories. As a result, bank's management decides to implement the structure, which facilitates the discussion in an integrative context, spanning market, credit, and operational risk factors, and encourages transparency and communication between risk disciplines. Which one...
