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Which of the following situations are not suitable for applying parametric VaR: I. Where the portfolio's valuation is linearly dependent upon risk factors II. Where the portfolio consists of non-linear products such as options and large moves are involved III. Where the returns of risk factors are known to be...

Which of the following is not a credit event under ISDA definitions?A . RestructuringB . Obligation accelerationsC . Rating downgradeD . Failure to payView AnswerAnswer: C Explanation: According to ISDA, a credit event is an event linked to the deteriorating credit worthiness of an underlying reference entity in a credit...

Which of the following are measures of liquidity risk I. Liquidity Coverage Ratio II. Net Stable Funding Ratio III. Book Value to Share Price IV. Earnings Per ShareA . III and IVB . I and IIC . II and IIID . I and IVView AnswerAnswer: B Explanation: In December 2009...

If an institution has $1000 in assets, and $800 in liabilities, what is the economic capital required to avoid insolvency at a 99% level of confidence? The VaR in respect of the assets at 99% confidence over a one year period is $100.A . 200B . 1000C . 100D ....

Which of the following best describes economic capital?A . Economic capital is the amount of regulatory capital mandated for financial institutions in the OECD countriesB . Economic capital is the amount of regulatory capital that minimizes the cost of capital for firmC . Economic capital reflects the amount of capital...

Which of the following formulae describes Marginal VaR for a portfolio p, where V_i is the value of the i-th asset in the portfolio? (All other notation and symbols have their usual meaning.) A) B) C) D) All of the aboveA . Option AB . Option BC . Option CD...

Which of the following would not be a part of the principal component structure of the term structure of futures prices?A . Curvature componentB . Trend componentC . Parallel componentD . Tilt componentView AnswerAnswer: C Explanation: The trend component refers to parallel shifts in the term structure, the tilt refers...

Under the standardized approach to calculating operational risk capital, how many business lines are a bank's activities divided into per Basel II?A . 7B . 15C . 8D . 12View AnswerAnswer: C Explanation: In the Standardized Approach, banks’ activities are divided into eight business lines: corporate finance, trading & sales,...

According to the Basel II standard, which of the following conditions must be satisfied before a bank can use 'mark-to-model' for securities in its trading book? I. Marking-to-market is not possible II. Market inputs for the model should be sourced in line with market prices III. The model should have...

The loss severity distribution for operational risk loss events is generally modeled by which of the following distributions: I. the lognormal distribution II. The gamma density function III. Generalized hyperbolic distributions IV. Lognormal mixturesA . II and IIIB . I, II and IIIC . I, II, III and IVD ....