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Gamma Bank will typically accept all of the following instruments as financial collateral EXCEPT?
To safeguard its capital and obtain insurance if the borrowers cannot repay their loans, Gamma Bank accepts financial collateral to manage its credit risk and mitigate the effect of the borrowers' defaults. Gamma Bank will typically accept all of the following instruments as financial collateral EXCEPT?A . Unrated bonds issued...
Which one of the following four options does NOT represent a benefit of compensating balances to the bank?
Which one of the following four options does NOT represent a benefit of compensating balances to the bank?A . Compensating balances allow the bank to net some of the exposure they may have in case of default, by taking funds from these specific deposit account one the borrower defaults.B ....
A credit risk analyst is evaluating factors that quantify credit risk exposures.
A credit risk analyst is evaluating factors that quantify credit risk exposures. The risk that the borrower would fail to make full and timely repayments of its financial obligations over a given time horizon typically refers to:A . Duration of default.B . Exposure at default.C . Loss given default.D ....
Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly approximates the yield on a risk-free instrument:
Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly approximates the yield on a risk-free instrument:A . Bond + CDSB . Bond + CDS + Market SpreadC . Bond - CDSD . Bond - CDS - Market spreadView AnswerAnswer: A
According to the largest global poll of foreign exchange market participants, which one of the following four global financial institutions was the most active participant in the global foreign exchange market?
According to the largest global poll of foreign exchange market participants, which one of the following four global financial institutions was the most active participant in the global foreign exchange market?A . CitibankB . UBS AGC . Deutsche BankD . Barclays CapitalView AnswerAnswer: C
According to a Moody's study, the most important drivers of the loss given default historically have been all of the following EXCEPT:
According to a Moody's study, the most important drivers of the loss given default historically have been all of the following EXCEPT: I. Debt type and seniority II. Macroeconomic environment III. Obligor asset type IV. RecourseA . IB . IIC . I, IID . III, IVView AnswerAnswer: D
In this case, what will the bank's expected loss 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 expected loss be?A...
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...
ThetaBank has extended substantial financing to two mortgage companies, which these mortgage lenders use to finance their own lending. Individually, each of the mortgage companies have an exposure at default (EAD) of $20 million, with a loss given default (LGD) of 100%, and a probability of default of 10%. ThetaBank's risk department predicts the joint probability of default at 5%.
ThetaBank has extended substantial financing to two mortgage companies, which these mortgage lenders use to finance their own lending. Individually, each of the mortgage companies have an exposure at default (EAD) of $20 million, with a loss given default (LGD) of 100%, and a probability of default of 10%. ThetaBank's...
What may happen to the Delta's initial credit parameter and the value of its loan if the machinery industry experiences adverse structural changes?
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both...
