- All Exams Instant Download
For a FX forward contract, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)
For a FX forward contract, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)A . At maturityB . Roughly three-quarters of the way towards maturityC . Indeterminate from the given informationD . Right after inceptionView AnswerAnswer: A Explanation: With the...
If E denotes the expected value of a loan portfolio at the end on one year and U the value of the portfolio in the worst case scenario at the 99% confidence level, which of the following expressions correctly describes economic capital required in respect of credit risk?
If E denotes the expected value of a loan portfolio at the end on one year and U the value of the portfolio in the worst case scenario at the 99% confidence level, which of the following expressions correctly describes economic capital required in respect of credit risk?A . E...
Which of the following credit risk models focuses on default alone and ignores credit migration when assessing credit risk?
Which of the following credit risk models focuses on default alone and ignores credit migration when assessing credit risk?A . CreditPortfolio ViewB . The contingent claims approachC . The CreditMetrics approachD . The actuarial approachView AnswerAnswer: D Explanation: The correct answer is Choice 'd'. The following is a brief description...
Under the CreditPortfolio View approach to credit risk modeling, which of the following best describes the conditional transition matrix:
Under the CreditPortfolio View approach to credit risk modeling, which of the following best describes the conditional transition matrix:A . The conditional transition matrix is the unconditional transition matrix adjusted for the state of the economy and other macro economic factors being modeledB . The conditional transition matrix is the...
If the daily volatility of interest rates is 2%, what is the 1-day VaR of the portfolio at a 95% confidence level?
An investor holds a bond portfolio with three bonds with a modified duration of 5, 10 and 12 years respectively. The bonds are currently valued at $100, $120 and $150. If the daily volatility of interest rates is 2%, what is the 1-day VaR of the portfolio at a 95%...
For an equity portfolio valued at V whose beta is, the value at risk at a 99% level of confidence is represented by which of the following expressions? Assume represents the market volatility.
For an equity portfolio valued at V whose beta is, the value at risk at a 99% level of confidence is represented by which of the following expressions? Assume represents the market volatility.A . 2.326 x x V xB . 1.64 x V x /C . 1.64 x x V...
Which of the following are valid approaches to leveraging external loss data for modeling operational risks:
Which of the following are valid approaches to leveraging external loss data for modeling operational risks: I. Both internal and external losses can be fitted with distributions, and a weighted average approach using these distributions is relied upon for capital calculations. II. External loss data is used to inform scenario...
Which of the following cannot be used as an internal credit rating model to assess an individual borrower:
Which of the following cannot be used as an internal credit rating model to assess an individual borrower:A . Distance to default modelB . Probit modelC . Logit modelD . Altman's Z-scoreView AnswerAnswer: A Explanation: Altman's Z-score, the Probit and the Logit models can all be used to assess the...
Which of the following is a most complete measure of the liquidity gap facing a firm?
Which of the following is a most complete measure of the liquidity gap facing a firm?A . Residual liquidity gapB . Liquidity at RiskC . Marginal liquidity gapD . Cumulative liquidity gapView AnswerAnswer: A Explanation: Marginal liquidity gap measures the expected net change in liquidity over, say, a day. It...
What is the EWMA estimate of the volatility the next day?
A stock's volatility under EWMA is estimated at 3.5% on a day its price is $10. The next day, the price moves to $11. What is the EWMA estimate of the volatility the next day? Assume the persistence parameter = 0.93. A. 0.0421 B. 0.0224 C. 0.0429 D. 0.0018View AnswerAnswer:...
