If the odds of default are 1:5, what is the probability of default?

If the odds of default are 1:5, what is the probability of default?A . 16.67%B . 20.00%C . 12.00%D . 50.00%View AnswerAnswer: A Explanation: Odds are the ratio between the probability of the occurence of an event to the probability that the event does not occur. If odds are H,...

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Which of the following best describes this exercise?

A bank evaluates the impact of large and severe changes in certain risk factors on its risk using a quantitative valuation model. Which of the following best describes this exercise?A . Stress testingB . SimulationC . Scenario analysisD . Sensitivity analysisView AnswerAnswer: C Explanation: It is important to note the...

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The VaR of a portfolio at the 99% confidence level is $250,000 when mean return is assumed to be zero. If the assumption of zero returns is changed to an assumption of returns of $10,000, what is the revised VaR?

The VaR of a portfolio at the 99% confidence level is $250,000 when mean return is assumed to be zero. If the assumption of zero returns is changed to an assumption of returns of $10,000, what is the revised VaR?A . 240000B . 226740C . 273260D . 260000View AnswerAnswer: A...

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Which of the following statements are true:

Which of the following statements are true: I. Credit VaR often assumes a one year time horizon, as opposed to a shorter time horizon for market risk as credit activities generally span a longer time period. II. Credit losses in the banking book should be assessed on the basis of...

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Which of the following is not a consideration in determining the liquidity needs of a firm (as opposed to determining the time horizon for liquidity risk)?

Which of the following is not a consideration in determining the liquidity needs of a firm (as opposed to determining the time horizon for liquidity risk)?A . Speed with which new equity can be issued to the ownersB . CollateralC . Off balance sheet itemsD . The firm's business modelView...

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Which of the following will be a loss not covered by operational risk as defined under Basel II?

Which of the following will be a loss not covered by operational risk as defined under Basel II?A . EarthquakesB . Fat finger lossesC . Systems failureD . Strategic planningView AnswerAnswer: D Explanation: Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people...

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Altman's Z-score does not consider which of the following ratios:

Altman's Z-score does not consider which of the following ratios:A . Market capitalization to debtB . Sales to total assetsC . Net income to total assetsD . Working capital to total assetsView AnswerAnswer: C Explanation: A computation of Altman's Z-score considers the following ratios: - Working capital to total assets...

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The definition of operational risk per Basel II includes which of the following:

The definition of operational risk per Basel II includes which of the following: I. Risk of loss resulting from inadequate or failed internal processes, people and systems or from external events II. Legal risk III. Strategic risk IV. Reputational riskA . I, II, III and IVB . II and IIIC...

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CORRECT TEXT

CORRECT TEXT A Monte Carlo simulation based VaR can be effectively used in which of the following cases:A . When returns data cannot be analytically modeledB . When returns are discontinuous or display large jumpsC . Where analytical methods are too complex to effectively useD . All of the aboveView...

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Which of the following credit risk models focuses on default alone and ignores credit migration when assessing credit risk?

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...

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