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An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___ risk on the contract and always receives a premium.
An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___ risk on the contract and always receives a premium.A . Never, unlimitedB ....
What interest rate should Alpha Bank charge on the no-payment loan to Delta Industrial Machinery Corporation?
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both...
As DeltaBank explores the securitization business, it is most likely to embrace securitization to:
As DeltaBank explores the securitization business, it is most likely to embrace securitization to: I. Bring transparency to the bank's balance sheet II. Create a new profit center for the bank III. Strategically release risk capital and regulatory capital for redeployment IV. Generate cash for additional debt originationA . I,...
Which of the following attributes are typical for early models of statistical credit analysis?
Which of the following attributes are typical for early models of statistical credit analysis?A . These models assumed the default of any obligor was independent of the default of any other.B . The underlying default assumptions were analytically inconvenient.C . The underlying default assumptions failed to develop relatively simple formulas...
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
Which of the following risks will be created as a result of the forward exchange transaction?
An asset manager for a large mutual fund is considering forward exchange positions traded in a clearinghouse system and needs to mitigate the risks created as a result of this operation. Which of the following risks will be created as a result of the forward exchange transaction?A . Exchange rate...
Which one of the following four statements correctly defines an option's delta?
Which one of the following four statements correctly defines an option's delta?A . Delta measures the expected decline in option with time and is usually expressed in years.B . Delta measures the effect of 1 bp in interest rate change on the option price.C . Delta is the multiplier that...
Which one of the following statements about futures contracts is correct?
Which one of the following statements about futures contracts is correct? I. Futures contracts are subject to the same risks as the underlying instruments. II. Futures contracts have additional interest rate risk die to the future delivery date. III. Futures contracts traded in a clearinghouse system are exposed to credit...
In the United States, during the second quarter of 2009, transactions in foreign exchange derivative contracts comprised approximately what proportion of all types of derivative transactions between financial institutions?
In the United States, during the second quarter of 2009, transactions in foreign exchange derivative contracts comprised approximately what proportion of all types of derivative transactions between financial institutions?A . 2%B . 7%C . 25%D . 43%View AnswerAnswer: B
By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following outcomes EXCEPT:
By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following outcomes EXCEPT:A . Aggressively courting of new businessB . Lower probability of defaultC . Rapid growthD . Higher losses in case of defaultView AnswerAnswer: B
