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Which of the following statements describes correctly the objectives of position mapping?
Which of the following statements describes correctly the objectives of position mapping? I. For VaR calculations, mapping converts positions based on their deltas to underlying factor risks. II. Position mapping models risk factors affecting the value of a position as combination of core risk factors used in the VaR calculations....
Rising TED spread is typically a sign of increase in what type of risk among large banks?
Rising TED spread is typically a sign of increase in what type of risk among large banks? I. Credit risk II. Market risk III. Liquidity risk IV. Operational riskA . I onlyB . II onlyC . I and IVD . I, II, and IIIView AnswerAnswer: D Explanation: The TED spread...
In the United States, Which one of the following four options represents the largest component of securitized debt?
In the United States, Which one of the following four options represents the largest component of securitized debt?A . Education loansB . Credit card loansC . Real estate loansD . Lines of creditView AnswerAnswer: C Explanation: In the United States, the largest component of securitized debt is represented by real...
Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk is correct?
Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk is correct?A . Parametric methods generally assume returns are normally distributed, and non-parametric methods make no assumptions about return distributions.B . Parametric methods make no assumptions about return distributions, and non-parametric methods assume returns are normally distributed.C...
Which of the following risk types does the asset manager need to consider when evaluating her diversified equity portfolio?
An endowment asset manager with a focus on long/short equity strategies is evaluating the risks of an equity portfolio. Which of the following risk types does the asset manager need to consider when evaluating her diversified equity portfolio? I. Company-specific projected earnings and earnings risk II. Aggregate earnings expectations III....
Which of the following statements depicts a difference between funding liquidity risks and trading liquidity risks?
Which of the following statements depicts a difference between funding liquidity risks and trading liquidity risks?A . Funding liquidity risks are associated with how fast prices move in the market while trading liquidity risks originate out of bank trades.B . Funding liquidity risks are concerned with the ability of the...
Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?
Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?A . Interest rate risk and credit riskB . Interest rate risk onlyC . Credit Risk onlyD . The bank does not incur...
To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:
To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:A . Credit VaRB . Expected lossC . Unexpected lossD . Factor sensitivityView AnswerAnswer: B Explanation: To quantify the aggregate average loss for the credit portfolio and...
Which one of the following four statements regarding floating rate bonds is incorrect?
Which one of the following four statements regarding floating rate bonds is incorrect?A . Floating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.B . Floating rate bonds typically have less price risk than fixed rate bonds.C . Floating rate bonds are very sensitive...
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...
