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Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:
Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:A . The change in value of a bond when yields increase by 0.01%.B . The percentage change in bond price when yields change by 1 basis point.C ....
Which one of the four attributes does not represent a critical feature of the upward reporting governance structure?
A risk associate responsible for the operational risk function wants to evaluate the upward reporting governance structure and to assess its critical features. Which one of the four attributes does not represent a critical feature of the upward reporting governance structure?A . IndependenceB . ImportanceC . RelevanceD . SecurityView AnswerAnswer:...
John owns a bond portfolio worth $2 million with duration of 10.
John owns a bond portfolio worth $2 million with duration of 10. What positions must he take to hedge this portfolio against a small parallel shifts in the term structure.A . Long position worth $2 million with duration of 10.B . Long position worth $20 million with duration of 1.C...
As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in value against other currencies.
As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in value against other currencies.A . Reduces, reduces, appreciateB . Reduces, reduces, depreciateC . Increases, reduces, appreciateD . Reduces, increases, depreciateView AnswerAnswer: A Explanation: When a country reduces its budget deficits and...
To estimate the required risk-adjusted rate of return on a highly volatile energy stock, a risk associate compiled the following statistics:
To estimate the required risk-adjusted rate of return on a highly volatile energy stock, a risk associate compiled the following statistics: Risk-free rate = 5% Beta = 2.5 Market Risk = 8% Using the Capital Asset Pricing Model, she estimates the rate of return to be equal:A . 10%B ....
The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:
The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:A . Legal riskB . Strategic riskC . Reputational riskD . Geopolitical riskView AnswerAnswer: A Explanation: The Basel II Accord's operational risk definition specifically includes legal risk. Operational risk under Basel II is defined as the risk...
An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.
An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.A . Positive; droppingB . Positive; risingC . Negative; droppingD . Negative; risingView AnswerAnswer: B Explanation: An asset-sensitive bank has more rate-sensitive assets than rate-sensitive liabilities. This results in a positive cumulative gap, meaning the...
Typically, which one of the following four option risk measures will be used to determine the number of options to use to hedge the underlying position?
Typically, which one of the following four option risk measures will be used to determine the number of options to use to hedge the underlying position?A . VegaB . RhoC . DeltaD . ThetaView AnswerAnswer: C Explanation: Delta is the most commonly used risk measure to determine the number of...
A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?
A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?A . His...
In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may borrow up to ___ of the value of the securities from their brokers.
In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may borrow up to ___ of the value of the securities from their brokers.A . 30%B . 40%C . 50%D . 60%View AnswerAnswer: C Explanation: T Identify the regulation: Regulation T of...
