Question 1

Which one of the following statements is an advantage of using implied volatility as an inputwhen calculating VaR?

Options :

A : Implied volatility assumes volatilities are constant which makes it easy to implement inmodels.

B : Current market data is used to determine implied volatilities, which makes them forwardlooking measures

C : Implied volatilities are better at predicting actual volatilities

D : Loss probabilities from the standard normal distribution are used to compute impliedvolatilities, which makes it easy to compute the.

Answer: B

Question 2

As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in value against other currencies

Options :

A : Reduces, reduces, appreciate

B : Reduces, reduces, depreciate

C : Increases, reduces, appreciate

D : Reduces, increases, depreciate

Answer: A

Question 3

Which one of the four following statements about drawdowns is correct?

Options :

A : Drawdown calculates significant losses in a particular business or a book.

B : Drawdown estimates the effect on bank-s liabilities when the bank-s credit rating is cut.

C :

Drawdown quantifies the peak-to-trough decline of an investment over a known time

period.

D :

Drawdown measures the aggregate decline in market values of assets and positions

due to a shock.

Answer: C

Question 4

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 ___ return on equity for the bank, because the cash generated by the risk-transfer and the overall ___ o the bank's exposure to the risk.

Options :

A : Increases; increase;

B : Increases; reduction;

C : Decreases; increase;

D : Decreases; reduction;

Answer: B

Question 5

Which one of the following changes would typically increase the price of a fixed income instrument, such as a bond?

Options :

A : Decrease in inflation rates in a country

B : Increase in time to maturity.

C : Increase in risk premium.

D : Increase in demand for goods and services.

Answer: A

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