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If a bank is long £500 million pounds, short £300 million in delta-equivalent pound options, and long £100 million in pound-denominated stocks, what is the amount of pound exposure that would be shown in the aggregated risk reports?
If a bank is long £500 million pounds, short £300 million in delta-equivalent pound options, and long £100 million in pound-denominated stocks, what is the amount of pound exposure that would be shown in the aggregated risk reports?A . £300 million poundsB . £500 million poundsC . £800 million poundsD...
Which of the following actions would best match the durations?
Banks duration match their assets and liabilities to manage their interest risk in their banking book. A bank has $100 million in interest rate sensitive assets and $100 million in interest rate sensitive liabilities. Currently the bank's assets have a duration of 5 and its liabilities have a duration of...
Why is economic capital across market, credit and operational risks simply added up to arrive at an estimate of aggregate economic capital in practice?
Why is economic capital across market, credit and operational risks simply added up to arrive at an estimate of aggregate economic capital in practice?A . Market, credit and operational risks are perfectly correlated which justifies adding up their associated economic capital.B . In practice, it is very difficult to estimate...
Financial regulators in a European country are considering banning trading in highly complex derivative instruments that are not settled through a centralized clearinghouse.
Financial regulators in a European country are considering banning trading in highly complex derivative instruments that are not settled through a centralized clearinghouse. This ban can result in: I. The value of the country's currency dropping II. Counterparties involved in trading of these derivative instruments failing to fulfill their obligations...
In additional to the commodity-specific risks, which of the following risks represent the main commodity derivative risks?
In additional to the commodity-specific risks, which of the following risks represent the main commodity derivative risks? I. Basis II. Term III. Correlation IV. SeasonalityA . I, IIB . II, IIIC . I, IVD . I, II, III, IVView AnswerAnswer: D Explanation: Commodity derivative risks encompass a variety of factors,...
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no credit losses.
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no credit losses.A . Symmetric; lessB . Symmetric; greaterC . Asymmetric; lessD...
What are some of the drawbacks of correlation estimates? Which of the following statements identifies major problems with correlation calculations?
What are some of the drawbacks of correlation estimates? Which of the following statements identifies major problems with correlation calculations? I. Correlation estimates are not able to capture increases in factor co-movements in extreme market scenarios. II. Correlation estimates tend to be unstable. III. Historical correlations may not forecast future...
An associate from the finance group has been identified as an operational risk coordinator (ORC) for her department.
An associate from the finance group has been identified as an operational risk coordinator (ORC) for her department. To fulfill her ORC responsibilities the associate will need to: I. Provide main communication contact with operational risk department II. Provide main reporting contact with audit department III. Coordinate collection of key...
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 ....
Which one of the following four statements correctly defines chooser options?
Which one of the following four statements correctly defines chooser options?A . The owner of these options decides if the option is a call or put option only when a predetermined date is reached.B . These options represent a variation of the plain vanilla option where the underlying asset is...
