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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...
Which one of the following four statements regarding bank's exposure to credit and default risk is INCORRECT?
Which one of the following four statements regarding bank's exposure to credit and default risk is INCORRECT?A . The more the bank diversifies its credit portfolio, the better spread its credit risks become.B . In debt management, the value of any loan exposure will change typically in a fashion similar...
Adding which of the following bonds would minimize the credit risk of his portfolio?
James Johnson manages a bond portfolio with all investment grade bonds. Adding which of the following bonds would minimize the credit risk of his portfolio?A . AB . BC . CD . DView AnswerAnswer: A Explanation: Minimizing credit risk in a bond portfolio involves selecting bonds with the highest credit...
Which of the following statements about the option gamma is correct?
Which of the following statements about the option gamma is correct? I. Second derivative of the option value with respect to the volatility. II. Percentage change in option value per percentage change in the price of the underlying instrument. III. Second derivative of the value function with respect to the...
Which one of the four following statements about Basis point values is correct?
Which one of the four following statements about Basis point values is correct? Basis point value:A . Is a widely used statistical tool used to measure market risk.B . Refers to the change in the value of a fixed income position for a very small change yields.C . Is a...
Which one of the following four exercise features is typical for the most exchange-traded equity options?
Which one of the following four exercise features is typical for the most exchange-traded equity options?A . Asian exercise featureB . American exercise featureC . European exercise featureD . A shout option exercise featureView AnswerAnswer: B Explanation: Most exchange-traded equity options in the U.S. typically have the American exercise feature....
Which of the following statements are true?
A multinational bank just bought two bonds each worth $10,000. One of the bonds pays a fixed interest of 5% semi-annually and the other pays LIBOR semi-annually. The six month LIBOR is at 5% currently. The risk manager of the bank is concerned about the sensitivity to interest rates. Which...
Which one of the following characteristics of a bank with wide retail operations is INCORRECT?
Gamma Bank has a significant number of retail customers and finds its balance sheet shape and structure difficult to manage. Which one of the following characteristics of a bank with wide retail operations is INCORRECT?A . Banks with a wide retail base are typically driven by contractual obligations and not...
Which one of the four following positions would most likely be not included in that book?
The market risk manager of SigmaBank is concerned with the value of the assets in the bank's trading book. Which one of the four following positions would most likely be not included in that book?A . 10,000 shares of IBM worth $10,000,000.B . $10,000,000 loan to IBM worth $9,800,000.C ....
Which one of the following four statements about hedging is INCORRECT?
Which one of the following four statements about hedging is INCORRECT?A . Traders can hedge their risks by taking an appropriate position in the underlying instrument.B . Traders can hedge their portfolio risks by taking a position in a different instrument.C . For a fully hedged portfolio, any changes in...
