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Gamma Bank is active in loan underwriting and securitization business, and given its collective credit exposure, it will be typically most interested in the following types of portfolio credit risk:
Gamma Bank is active in loan underwriting and securitization business, and given its collective credit exposure, it will be typically most interested in the following types of portfolio credit risk: I. Expected loss II. Duration III. Unexpected loss IV. Factor sensitivitiesA . IB . IIC . I, IIID . I,...
At first approximation, what is the overall result of the options positions?
A risk manager has a long forward position of USD 1 million but the option portfolio decreases JPY 0.50 for every JPY 1 increase in his forward position. At first approximation, what is the overall result of the options positions?A . The options positions hedge the forward position by 25%.B...
Which one of the following four options correctly identifies the core difference between bonds and loans?
Which one of the following four options correctly identifies the core difference between bonds and loans?A . These instruments receive a different legal treatment.B . These instruments have different pricing drivers.C . These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.D . These...
Which one of the following four formulas correctly identifies the expected loss for all credit instruments?
Which one of the following four formulas correctly identifies the expected loss for all credit instruments?A . Expected Loss = Probability of Default x Loss Given Default x Exposure at DefaultB . Expected Loss = Probability of Default x Loss Given Default + Exposure at DefaultC . Expected Loss =...
In this case, what will the bank's exposure at default (EAD) be?
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's exposure at default...
Which one of the following four statements does identify correctly the relationship between the value of an option and perceived exchange rate volatility?
Which one of the following four statements does identify correctly the relationship between the value of an option and perceived exchange rate volatility?A . With increases in perceived future foreign exchange volatility, the value of all foreign exchangeB . As the perceived future foreign exchange volatility decreases, the value of...
The pricing of credit default swaps is a function of all of the following EXCEPT:
The pricing of credit default swaps is a function of all of the following EXCEPT:A . Probability of defaultB . DurationC . Loss given defaultD . Market spreadsView AnswerAnswer: B
Which one of the following four statements correctly defines credit risk?
Which one of the following four statements correctly defines credit risk?A . Credit risk is the risk that complements market and liquidity risks.B . Credit risk is a form of performance risk in contractual relationship.C . Credit risk is the risk arising from execution of a company's strategy.D . Credit...
To estimate the interest charges on the loan, an analyst should use one of the following four formulas:
To estimate the interest charges on the loan, an analyst should use one of the following four formulas:A . Loan interest = Risk-free rate - Probability of default x Loss given default + SpreadB . Loan interest = Risk-free rate + Probability of default x Loss given default + SpreadC...
Which one of the following four options is NOT a typical component of a currency swap?
Which one of the following four options is NOT a typical component of a currency swap?A . An initial currency exchange of the notional amountB . Denomination of the original notional amount into a foreign currencyC . Periodic exchange of interest payments in different currenciesD . A final currency exchangeView...
