Which one of the following four statements about the relationship between exchange rates and option values is correct?

Which one of the following four statements about the relationship between exchange rates and option values is correct?A . As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate decreases.B . As the dollar appreciates relative to the pound, the right...

April 29, 2025 No Comments READ MORE +

The data available to estimate the statistical distribution of bank losses is difficult to assemble for which of the following reasons?

The data available to estimate the statistical distribution of bank losses is difficult to assemble for which of the following reasons? I. The needed data is vast in quantity. II. The data requires bringing together significantly different measures of risk. III. Some risks are difficult to quantify and hence the...

April 28, 2025 No Comments READ MORE +

Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:

Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:A . Exposures can often be nettedB . Exposure at default may be negatively correlated to the probability of defaultC . Counterparty risk creates a two-way credit exposureD . Collateral arrangements are typically static...

April 26, 2025 No Comments READ MORE +

What is a difference between currency swaps and interest rate swaps?

What is a difference between currency swaps and interest rate swaps?A . Currency swaps do not require the exchange of notional principal on maturity.B . Currency swaps allow banks and customers to obtain the risk/reward profile of long-term interest rates without having to use long-term funding.C . Currency swaps are...

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According to Basel II what constitutes Tier 1 capital?

According to Basel II what constitutes Tier 1 capital?A . Equity capital and core capitalB . Profits to reserves and innovative Tier 1 capitalC . Equity capital and accrued profits to reservesD . Core capital and innovative Tier 1 capital.View AnswerAnswer: C Explanation: Under Basel II, Tier 1 capital, also...

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Interest rate swaps are:

Interest rate swaps are:A . Exchange traded derivative contracts that allow banks to take positions in future interest rates.B . OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term interest rates without relying on long-term funding.C . Exchange traded derivative contracts that allow banks...

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For a bank a 1-year VaR of USD 10 million at 95% confidence level means that:

For a bank a 1-year VaR of USD 10 million at 95% confidence level means that:A . There is a 5% chance that the bank would lose less than USD 10 million in a year.B . There is a 5% chance that the bank would lose more than USD 10...

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Which of the following assets on the bank's balance sheet has greatest endogenous liquidity risk?

Which of the following assets on the bank's balance sheet has greatest endogenous liquidity risk?A . A 2-year U.S treasury bondB . A 1-week corporate loan with a AAA rated companyC . A 10-year U.S treasury bondD . A 3-year subprime mortgageView AnswerAnswer: D Explanation: Endogenous liquidity risk refers to...

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What is the portfolio VaR?

James Johnson has a $1 million long position in ThetaGroup with a VaR of 0.3 million, and $1 million long position in VolgaCorp with a VaR of 0.4 million. The returns of the two companies have zero correlation. What is the portfolio VaR?A . $1 millionB . $0.7 millionC ....

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