SOFE SOFE Certifications AFE Questions & Answers

• Question 181:

  Interest rates are a key element of any option pricing exercise because cash flows are discounted at interest.

  A. True

  B. False

  Correct Answer: B

• Question 182:

  Quantifies the sensitivity of the option price to changes in interest rates is known as:

  A. complexity measure

  B. quantifiable measure

  C. effective duration measure

  D. change measure

  Correct Answer: C

• Question 183:

  Which of the following is NOT of equity market sensitivities that are usually considered in dynamic hedging?

  A. Delta

  B. Vega

  C. theta

  D. alpha

  Correct Answer: D

• Question 184:

  What is the second-order measure of the interest rate sensitivity of an instrument and the sensitivity of duration to changes in interest rates?

  A. Complexity

  B. Convexity

  C. Time compliance

  D. Performance measure

  Correct Answer: B

• Question 185:

  By quantifying interest rate sensitivity, investment risk and can also indicate corrective actions.

  A. Experimental measure

  B. Investment measures

  C. Quantifiable measures

  D. Duration measure

  Correct Answer: D

• Question 186:

  Immunization theory says that:

  A. duration matching requires rebalancing the asset portfolio, but the theoretically correct answer is to rebalance continuously.

  B. Investment matching requires rebalancing the liabilities portfolio, but the theoretically correct answer is to rebalance annually.

  C. Performance matching requires rebalancing the expense portfolio, but the theoretically correct answer is to rebalance continuously as and when needed only.

  D. Balance matching requires rebalancing the revenues portfolio, but the theoretically correct answer is to rebalance continuously.

  Correct Answer: A

• Question 187:

  What confirms the hypothesized interest rate sensitivities and shows that the two lines of business are fairly complementary?

  A. Harmonizing graph

  B. Balance curve

  C. Price behavior curve

  D. List pricing graph

  Correct Answer: C

• Question 188:

  Duration is a measure of the first-order interest rate sensitivity of a financial instrument.

  A. True

  B. False

  Correct Answer: A

• Question 189:

  What seeks to identify and exploit existing or potential synergies in a company's diverse business activities?

  A. Appropriate business decisions

  B. Holistic techniques

  C. Collateral strategies

  D. Reimbursement activities

  Correct Answer: B

• Question 190:

  Selling a stream of contingent revenues to another party, at a discount to the expected value is called:

  A. Prioritized investment

  B. Reinsurance

  C. Profit

  D. Securitization.

  Correct Answer: D