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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...

When considering a request for a loan from a retail customer, which of the following factors is relevant for a bank to consider:A . The other retail loans in its portfolioB . The credit worthiness of the retail customerC . The contribution this new loan would bring to total portfolio...

Which of the following are considered counterparty based credit enhancements? I. Collateral II. Credit default swaps III. Close out netting arrangements IV. GuaranteesA . I and IIIB . II and IVC . I, II and IVD . I and IVView AnswerAnswer: B Explanation: Credit enhancements come in two varieties: counterparty...

Under the KMV Moody's approach to calculating expecting default frequencies (EDF), firms' default on obligations is likely when:A . expected asset values one year hence are below total liabilitiesB . asset values reach a level below short term debtC . asset values reach a level below total liabilitiesD . asset...

As the persistence parameter under EWMA is lowered, which of the following would be true:A . The model will react slower to market shocksB . The model will react faster to market shocksC . High variance from the recent past will persist for longerD . The model will give lower...

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 probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the...

In respect of operational risk capital calculations, the Basel II accord recommends a confidence level and time horizon of:A . 99.9% confidence level over a 10 day time horizonB . 99% confidence level over a 10 year time horizonC . 99% confidence level over a 1 year time horizonD ....

An equity manager holds a portfolio valued at $10m which has a beta of 1.1. He believes the market may see a dip in the coming weeks and wishes to eliminate his market exposure temporarily. Market index futures are available and the current futures notional on these is $50,000 per...

Loss provisioning is intended to cover:A . Unexpected lossesB . Losses in excess of unexpected lossesC . Both expected and unexpected lossesD . Expected lossesView AnswerAnswer: D Explanation: Loss provisioning is intended to cover expected losses. Economic capital is expected to cover unexpected losses. No capital or provisions are set...

Which of the following best describes Altman's Z-scoreA . A calculation of default probabilitiesB . A regression of probability of survival against a given set of factorsC . A numerical computation based upon accounting ratiosD . A standardized z based upon the normal distributionView AnswerAnswer: C Explanation: Choice 'c' correctly...