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An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.
An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.A . Positive; droppingB . Positive; risingC . Negative; droppingD . Negative; risingView AnswerAnswer: B Explanation: An asset-sensitive bank has more rate-sensitive assets than rate-sensitive liabilities. This results in a positive cumulative gap, meaning the...
Typically, which one of the following four option risk measures will be used to determine the number of options to use to hedge the underlying position?
Typically, which one of the following four option risk measures will be used to determine the number of options to use to hedge the underlying position?A . VegaB . RhoC . DeltaD . ThetaView AnswerAnswer: C Explanation: Delta is the most commonly used risk measure to determine the number of...
A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?
A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?A . His...
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.
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.A . 30%B . 40%C . 50%D . 60%View AnswerAnswer: C Explanation: T Identify the regulation: Regulation T of...
How much should the bank plan to raise in order to avoid liquidity problems?
Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that settles in two days and pays off $8 million in commercial...
Which of the following statements regarding CDO-squared is correct?
Which of the following statements regarding CDO-squared is correct? I. CDO-squared use other CDOs and CMOs as collateral. II. Risk assessment of CDO-squared is almost impossible due to their complexity. III. CDO-squared have lower credit risk than CMOs but higher than CDOs.A . I onlyB . I and IIC ....
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,...
