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In the case of historical volatility weighted VaR, a higher current volatility when compared to historical volatility:A . will not affect the VaR estimateB . will increase the confidence intervalC . will decrease the VaR estimateD . will increase the VaR estimateView AnswerAnswer: D Explanation: When calculating volatility weighted VaR,...

The Basel framework does not permit which of the following Units of Measure (UoM) for operational risk modeling: I. UoM based on legal entity II. UoM based on event type III. UoM based on geography IV. UoM based on line of businessA . I and IVB . III onlyC ....

The probability of default of a security over a 1 year period is 3%. What is the probability that it would have defaulted within 6 months?A . 98.49%B . 3.00%C . 1.51%D . 17.32%View AnswerAnswer: C Explanation: The question is asking for the probability of default over a 6 month...

For a security with a daily standard deviation of 2%, calculate the 10-day VaR at the 95% confidence level. Assume expected daily returns to be nil.A . 0.02B . 0.104C . 0.1471D . None of the above.View AnswerAnswer: B Explanation: If the daily standard deviation is 2%, the 10-day standard...

Which of the following are considered properties of a 'coherent' risk measure: I. Monotonicity II. Homogeneity III. Translation Invariance IV. Sub-additivityA . II and IIIB . II and IVC . I and IIID . All of the aboveView AnswerAnswer: B Explanation: All of the properties described are the properties of...

Which of the following credit risk models focuses on default alone and ignores credit migration when assessing credit risk?A . CreditPortfolio ViewB . The contingent claims approachC . The CreditMetrics approachD . The actuarial approachView AnswerAnswer: D Explanation: The correct answer is Choice 'd'. The following is a brief description...

For a US based investor, what is the 10-day value-at risk at the 95% confidence level of a long spot position of EUR 15m, where the volatility of the underlying exchange rate is 16% annually. The current spot rate for EUR is 1.5. (Assume 250 trading days in a year).A...

Which of the following statements are true: I. Top down approaches help focus management attention on the frequency and severity of loss events, while bottom up approaches do not. II. Top down approaches rely upon high level data while bottom up approaches need firm specific risk data to estimate risk....

Which of the following need to be assumed to convert a transition probability matrix for a given time period to the transition probability matrix for another length of time: I. Time invariance II. Markov property III. Normal distribution IV. Zero skewnessA . I, II and IVB . III and IVC...

The CDS rate on a defaultable bond is approximated by which of the following expressions:A . Hazard rate / (1 - Recovery rate)B . Loss given default x Default hazard rateC . Credit spread x Loss given defaultD . Hazard rate x Recovery rateView AnswerAnswer: B Explanation: The CDS rate...