Which one of the four following non-statistical risk measures are typically not used to quantify market risk?
A. Option sensitivities
B. Net closed positions
C. Convexity
D. Basis point values
A risk associate responsible for the operational risk function wants to evaluate the upward reporting governance structure and to assess its critical features. Which one of the four attributes does not represent a critical feature of the upward reporting governance structure?
A. Independence
B. Importance
C. Relevance
D. Security
Operational risk team for a large international bank is implementing business continuity planning (BCP). Which of the following BCP activities fall within the definition of operational risk and represent Basel II Accord's operational risk categories:
I. Damage to Physical Assets
II. Business Disruption and System Failures
III. Social Distancing Requirements
IV.
Potential for Extreme Losses
A.
I and II
B.
III
C.
I and IV
D. III and IV
US based Alpha Bank holds European corporate bonds and US inflationndexed Treasury notes in its investment portfolio. This investment portfolio is not exposed to changes in which of the following?
A. Foreign exchange rates
B. Credit spread on the corporate bonds
C. Equity values
D. European interest rates
A risk analyst is considering how to reduce the bank's exposure to rising interest rates. Which of the following strategies will help her achieve this objective?
I. Reducing the average repricing time of its loans
II. Increasing the average repricing time of its deposits III. Entering into interest rate swaps
IV.
Improving earnings capacity and increasing intermediated funds
A.
I, II
B.
III
C.
IV
D.
I, II, IV
Which one of the following four alternatives correctly identifies the purpose of a clearinghouse in trading activities?
A. Reduction of counterparty risk and liquidity risk
B. Reduction of basis risk and mark-to-market risk
C. Reduction of operational risk and credit risk
D. Reduction of market risk and credit risk
What are the add-on losses faced by a bank that is going bankrupt?
I. The discount accepted by the bank for selling its assets in a fire sale.
II. The increased cost of funding liabilities in a financially distressed situation.
III. The reduction in the present value of future growth opportunities.
IV.
Loss of goodwill and intangible assets.
A.
I, II
B.
II, III, IV
C.
III, IV
D.
I, II, III, IV.
Why do regulatory standards impose formulaic capital calculations for all of the banks activities?
I. If the banks use different models it is difficult for a regulator to compare results across banks.
II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in their calculations.
III.
By imposing standardized calculations regulators can make sure that banks do not use capital calculations to game the banking regulation system.
A.
I
B.
I,II
C.
II, III
D.
I,II, III
Which one of the four following statements about Basis point values is correct? Basis point value:
A. Is a widely used statistical tool used to measure market risk.
B. Refers to the change in the value of a fixed income position for a very small change yields.
C. Is a risk sensitivity measure used to measure the point spread risk in the banking book.
D. Provides a quick estimate of the sensitivity of the bank's banking book, to increasing volatility in interest rates.
An organization's enterprise risk management framework defines its risk profile and typically reflects the organization's
I. Market and credit risks
II. Operational and liquidity risks
III. Strategic and geopolitical risks
IV.
Structural developments and industry position
A.
I, II
B.
I, IV
C.
II, III
D.
I, II, III
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