2016-FRR Braindumps Real Exam Updated on Mar 05, 2022 with 345 Questions
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NEW QUESTION 201
Which of the following statements regarding collateralized debt obligations (CDOs) is correct?
I. CDOs typically have loans or bonds as underlying collateral.
II. CDOs generally less risky than CMOs.
III. There is a correlation among defaults in the CDO collateral which should be considered in valuation of
these complex instruments.
- A. I and III
- B. I only
- C. I, II, and III
- D. II and III
Answer: A
NEW QUESTION 202
Alpha Bank estimates its 1-month, 95% VaR is 30 million EUR. This means that in the next month, there is a
- A. 95% chance that AlphaBank can lose more than 30 million EUR.
- B. 95% chance that AlphaBank will at least lose 30 million EUR.
- C. 95% chance that AlphaBank can lose at most 30 million EUR.
- D. 95% chance that AlphaBank will lose exactly 30 million EUR.
Answer: C
NEW QUESTION 203
Which one of the four following statements regarding foreign exchange (FX) swap transactions is
INCORRECT?
- A. FX swap is generally used to for funding foreign currency balances and currency speculation.
- B. FX swap is normally used for hedging various currency positions.
- C. FX swap is a common short-term transaction.
- D. FX swap generates more exchange rate risk than simple forward transactions.
Answer: D
NEW QUESTION 204
Which of the following statements about endogenous and exogenous types of liquidity are accurate?
I. Endogenous liquidity is the liquidity inherent in the bank's assets themselves.
II. Exogenous liquidity is the liquidity provided by the bank's liquidity structure to fund its assets and maturing
liabilities.
III. Exogenous liquidity is the non-contractual and contingent capital supplied by investors to support the bank
in times of liquidity stress.
IV. Endogenous liquidity is the same as funding liquidity.
- A. II, III
- B. I, III
- C. I, II, IV
- D. I, II
Answer: D
NEW QUESTION 205
Which one of the following four statements correctly identifies the Basel II Accord's definition of operational
risk?
- A. Operational risk is all the risk that is not captured by market and credit risks.
- B. Operational risk is the risk of loss resulting from inadequate or failed processes, people and systems or
from external events. - C. Operational risk is a risk arising from execution of a company's business functions.
- D. Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it
attempts to operate within a given field or industry.
Answer: B
NEW QUESTION 206
James Arthur is a customer of a bank who has taken a floating rate loan from the bank. He is concerned that
the rates may rise in the future increasing his payment amount. Which of the following instruments should he
buy to hedge against the rise in interest rates?
- A. Interest rate cap
- B. Index amortizing swap
- C. Interest rate swap that receives fixed and pays floating
- D. Interest rate floor
Answer: A
NEW QUESTION 207
US based Alpha Bank holds European corporate bonds and US inflation-indexed Treasury notes in its
investment portfolio. This investment portfolio is not exposed to changes in which of the following?
- A. Credit spread on the corporate bonds
- B. Foreign exchange rates
- C. European interest rates
- D. Equity values
Answer: D
NEW QUESTION 208
Which one of the following four statements best describes challenges of delta-normal method of mapping
options positions?
Delta-normal method understates
- A. Risks of short option positions and overstates risks of long option positions for both calls and puts.
- B. Risks of long and short positions for both calls and puts.
- C. Risks of long option positions for puts and overstates risks of short option positions for calls.
- D. Risks of long option positions for calls and overstates risks of short option positions for puts.
Answer: A
NEW QUESTION 209
Which one of the following four statements correctly defines a typical carry trade?
- A. A bank borrows funds in a low-interest currency, accumulates reserves, and lends in another
low-interest currency. - B. A bank borrows funds in a high-interest currency and invests the funds into high-yield emerging market
debt. - C. A bank borrows funds in a high-interest currency and places the funds in a long-term low volatility
investment vehicle. - D. A bank borrows funds in a low-interest currency and places the funds on deposit in a high-interest
currency.
Answer: D
NEW QUESTION 210
Which one of the following four metrics represents the difference between the expected loss and unexpected
loss on a credit portfolio?
- A. Probability of default
- B. Modified duration
- C. Loss given default
- D. Credit VaR
Answer: D
NEW QUESTION 211
Sam has hedged a portfolio of bonds against a small parallel shift in the yield curve using the duration
measure. What should Sam do to ensure that the portfolio is hedged against larger parallel shifts in the yield
curve?
- A. Take positions to increase the duration
- B. Take positions to make the convexity zero
- C. Since the portfolio is duration hedged Sam does not need to take additional positions.
- D. Take positions to reduce the duration
Answer: B
NEW QUESTION 212
Which among the following are shortfalls of the static liquidity ladder model?
I. The static model gives a liquidity estimate only after the bank faces the liquidity problem.
II. The static model can only make projections over a few days.
III. The static model does not incorporate uncertainty in the analysis.
- A. III
- B. I, III
- C. I, II, III
- D. I, II
Answer: A
NEW QUESTION 213
Which of the following bank events could stress the bank's liquidity position?
I. Obligations to fund assets like mortgages
II. Unusually large depositor withdrawals
III. Counterparty collateral calls
IV. Nonperforming assets
- A. IV
- B. III, IV
- C. I, II, III and IV
- D. I, II
Answer: C
NEW QUESTION 214
Arnold Wu owns a floating rate bond. He is concerned that the rates may fall in the future decreasing his
payment amount. Which of the following instruments should he buy to hedge against the fall in interest rates?
- A. Interest rate cap
- B. Interest rate floor
- C. Index amortizing swap
- D. Interest rate swap that receives floating and pays fixed
Answer: B
NEW QUESTION 215
To manage its credit portfolio, Beta Bank can directly sell the following portfolio elements:
I. Bonds
II. Marketable loans
III. Credit card loans
- A. II, III
- B. I
- C. I, II
- D. II
Answer: C
NEW QUESTION 216
Which of the following statements presents an advantage of using risk and control self-assessments (RCSA) in
the operational risk framework?
I. RCSA provides very accurate scoring of risks and controls due to its subjective nature.
II. RCSA program provides insight into risks that exist in a firm, but that may or may not have occurred
before.
III. RCSA program can produce biased but transparent operational risk reporting.
IV. RCSA program allows each department to take ownership of its own risks and controls.
- A. II and IV
- B. I, II and III
- C. I and III
- D. II, III, and IV
Answer: A
NEW QUESTION 217
To achieve leverage in long positions, a bank can use the following strategy:
I. Securities may be purchased with borrowed funds using a bank loan from the broker.
II. Securities may be borrowed on margin by taking a loan from a broker.
III. Securities may be purchased and used in a repo transaction to generate cash for further security purchases.
IV. The bank may enter into a derivative transaction, such as a total return swap, that requires little to no
collateral but mimics the performance of a long or short position in the underlying instrument.
- A. II, IV
- B. I, II, III, IV
- C. I, III
- D. I, II
Answer: B
NEW QUESTION 218
Which one of the following four statements about hedging is INCORRECT?
- A. Traders can hedge their risks by taking an appropriate position in the underlying instrument.
- B. Traders can hedge their portfolio risks by taking a position in a different instrument.
- C. A large number of hedge positions is generally required to match the underlying transaction completely.
- D. For a fully hedged portfolio, any changes in markets prices will typically produce significant changes in
the market value of the portfolio.
Answer: D
NEW QUESTION 219
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