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When the volatility of the yield for a bond increases, which of the following statements is true:
When the volatility of the yield for a bond increases, which of the following statements is true:A . The VaR for the bond decreases and its value increasesB . The VaR for the bond increases and its value decreasesC . The VaR for the bond decreases and its value is...
The largest 10 losses over a 250 day observation period are as follows. Calculate the expected shortfall at a 98% confidence level:
The largest 10 losses over a 250 day observation period are as follows. Calculate the expected shortfall at a 98% confidence level: 20m 19m 19m 17m 16m 13m 11m 10m 9m 9mA . 19.5B . 14.3C . 18.2D . 16View AnswerAnswer: C Explanation: For a dataset with 250 observations, the...
Which of the following statements is a correct description of the phrase present value of a basis point?
Which of the following statements is a correct description of the phrase present value of a basis point?A . It refers to the present value impact of 1 basis point move in an interest rate on a fixed income securityB . It refers to the discounted present value of 1/100th...
The results of 'desk-level' stress tests cannot be added together to arrive at institution wide estimates because:
The results of 'desk-level' stress tests cannot be added together to arrive at institution wide estimates because:A . Desk-level stress tests tend to ignore higher level risks that are relevant to the institution but completely outside the control of the individual desks.B . Desk-level stress tests focus on desk specific...
If and are the expected rate of return and volatility of an asset whose prices are log-normally distributed, and a random drawing from a standard normal distribution, we can simulate the asset's returns using the expressions:
If and are the expected rate of return and volatility of an asset whose prices are log-normally distributed, and a random drawing from a standard normal distribution, we can simulate the asset's returns using the expressions:A . - + .B . + .C . / .D . - .View AnswerAnswer:...
Which of the following statements are correct?
The daily VaR of an investor's commodity position is $10m. The annual VaR, assuming daily returns are independent, is ~$158m (using the square root of time rule). Which of the following statements are correct? I. If daily returns are not independent and show mean-reversion, the actual annual VaR will be...
The frequency distribution for operational risk loss events can be modeled by which of the following distributions:
The frequency distribution for operational risk loss events can be modeled by which of the following distributions: I. The binomial distribution II. The Poisson distribution III. The negative binomial distribution IV. The omega distributionA . I, II and IIIB . I and IIIC . I, III and IVD . I,...
For a corporate issuer, which of the following can be used to calculate market implied default probabilities?
For a corporate issuer, which of the following can be used to calculate market implied default probabilities? I. CDS spreads II. Bond prices III. Credit rating issued by S&P IV. Altman's scoring modelA . III and IVB . I and IIC . I, II and IIID . II and IIIView...
If the default correlation is 25%, what is the one year expected loss on this portfolio?
There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the default correlation is 25%, what is the one year expected loss on this portfolio?A . $1.38mB...
Regulatory arbitrage refers to:
Regulatory arbitrage refers to:A . the practice of transferring business and profits to jurisdictions (such as those in other countries) to avoid or reduce capital adequacy requirementsB . the practice of structuring a financial institution's business as a bank holding company to arbitrage the differing capital and credit rating requirements...
