2016-FRR

An endowment asset manager with a focus on long/short equity strategies is evaluating the risks of an equity portfolio. Which of the following risk types does the asset manager need to consider when evaluating her diversified equity portfolio? I. Company-specific projected earnings and earnings risk II. Aggregate earnings expectations III....

Which of the following statements depicts a difference between funding liquidity risks and trading liquidity risks?A . Funding liquidity risks are associated with how fast prices move in the market while trading liquidity risks originate out of bank trades.B . Funding liquidity risks are concerned with the ability of the...

Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?A . Interest rate risk and credit riskB . Interest rate risk onlyC . Credit Risk onlyD . The bank does not incur...

To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:A . Credit VaRB . Expected lossC . Unexpected lossD . Factor sensitivityView AnswerAnswer: B Explanation: To quantify the aggregate average loss for the credit portfolio and...

Which one of the following four statements regarding floating rate bonds is incorrect?A . Floating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.B . Floating rate bonds typically have less price risk than fixed rate bonds.C . Floating rate bonds are very sensitive...

If a bank is long £500 million pounds, short £300 million in delta-equivalent pound options, and long £100 million in pound-denominated stocks, what is the amount of pound exposure that would be shown in the aggregated risk reports?A . £300 million poundsB . £500 million poundsC . £800 million poundsD...

Banks duration match their assets and liabilities to manage their interest risk in their banking book. A bank has $100 million in interest rate sensitive assets and $100 million in interest rate sensitive liabilities. Currently the bank's assets have a duration of 5 and its liabilities have a duration of...

Why is economic capital across market, credit and operational risks simply added up to arrive at an estimate of aggregate economic capital in practice?A . Market, credit and operational risks are perfectly correlated which justifies adding up their associated economic capital.B . In practice, it is very difficult to estimate...

Financial regulators in a European country are considering banning trading in highly complex derivative instruments that are not settled through a centralized clearinghouse. This ban can result in: I. The value of the country's currency dropping II. Counterparties involved in trading of these derivative instruments failing to fulfill their obligations...

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. SeasonalityA . I, IIB . II, IIIC . I, IVD . I, II, III, IVView AnswerAnswer: D Explanation: Commodity derivative risks encompass a variety of factors,...