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Which of the following factors will represent typical disadvantages of market-linked credit risk drivers?
A credit portfolio manager analyzes a large retail credit portfolio. Which of the following factors will represent typical disadvantages of market-linked credit risk drivers? I. Need to supply a large number of input parameters to the model II. Slow computation speed due to higher simulation complexity III. Non-linear nature of...
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a result it ___ return on equity for the bank.
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a result it ___ return on equity for the bank.A . Decreases; increases;B...
Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:
Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:A . Exposures can often be nettedB . Exposure at default may be negatively correlated to the probability of defaultC . Counterparty risk creates a two-way credit exposureD . Collateral arrangements are typically static...
From the bank's point of view, repricing the retail debt portfolio will introduce risks of fluctuations in:
From the bank's point of view, repricing the retail debt portfolio will introduce risks of fluctuations in: I. Duration II. Loss given default III. Interest rates IV. Bank spreadsA . IB . IIC . I, IID . III, IVView AnswerAnswer: D
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no credit losses.
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no credit losses.A . Symmetric; lessB . Symmetric; greaterC . Asymmetric; lessD...
The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential failure of a borrower to fulfill its payment requirements, which include both the repayment of the amount borrowed, the principal and the contractual interest payments, would be called ___.
The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential failure of a borrower to fulfill its payment requirements, which include both the repayment of the amount borrowed, the principal and the contractual interest payments, would be called ___.A . Credit risk; market...
Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a foreign exchange option?
Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a foreign exchange option?A . Underlying exchange ratesB . Underlying interest ratesC . Discrete future stock pricesD . Option exercise priceView AnswerAnswer: C
At which one of the following exchanges can the smaller bank trade the currency futures contracts?
To hedge a foreign exchange exposure on behalf of a client, a small regional bank seeks to enter into an offsetting foreign exchange transaction. It cannot access the large and liquid interbank market open primarily to larger banks. At which one of the following exchanges can the smaller bank trade...
To estimate a partial change in option price, a risk manager will use the following formula:
To estimate a partial change in option price, a risk manager will use the following formula:A . Partial change in option price = Delta x Change in underlying priceB . Partial change in option price = Delta x (1+ Change in underlying price)C . Partial change in option price =...
A financial analyst is trying to distinguish credit risk from market risk. A $100 loan collateralized with $200 in stock has limited ___, but an uncollateralized obligation issued by a large bank to pay an amount linked to the long-term performance of the Nikkei 225 Index that measures the performance of the leading Japanese stocks on the Tokyo Stock Exchange likely has more ___ than ___.
A financial analyst is trying to distinguish credit risk from market risk. A $100 loan collateralized with $200 in stock has limited ___, but an uncollateralized obligation issued by a large bank to pay an amount linked to the long-term performance of the Nikkei 225 Index that measures the performance...
