QUESTION 57
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. If these CDOs can be used in a repo transaction at a 20% haircut, what is the maximum leverage factor for a transaction with the CDOs?

QUESTION 58
An options trader for a large institutional investor takes a long equity option position. Which of the following risks need to be considered when taking this position?
I. All the risks of underlying equities
II. Perceived volatility changes
III. Future dividends yields
IV. Risk-free interest rates

QUESTION 59
Which of the following statements about implementation of a successful RCSA program is correct?

QUESTION 60
Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew.
How much money should the bank plan to raise so as to avoid a liquidity problem?

QUESTION 61
Which one of the following four statements about the “market-maker” trading strategy is INCORRECT?

QUESTION 62
Which of the following correctly identifies reasons for collecting internal operational risk event and loss information?
I. Assessing the risk of specific areas of concern.
II. Evaluating risk events and outcomes.
III. Collecting data for capital modeling.
IV. Getting insight into risk events in other firms in the industry.

QUESTION 63
Which one of the following four statements correctly defines a typical carry trade?

QUESTION 64
John owns a bond portfolio worth $2 million with duration of 10. What positions must he take to hedge this portfolio against a small parallel shifts in the term structure.

QUESTION 65
When creating a model to estimate risk, it is important to recognize which one of the following?

QUESTION 66
Of all the risk factors in loan pricing, which one of the following four choices is likely to be the least significant?

QUESTION 67
Which one of the following activities is carried out by the back office?

QUESTION 68
The technique of using interest rate swap positions to reduce the effect of the variability of interest rates on net interest income is known as:

QUESTION 69
Suppose that a regulator deems all corporate debt to have the same risk level. Which of the following behavior
of banks would be an example of regulatory arbitrage?

QUESTION 70
Floating rate bonds typically have ________ duration which means they have ________ sensitivity to interest
rate changes.

QUESTION 71
Which one of the following four statements about economic capital of a bank is correct?

QUESTION 72
Most loans and deposits in the interbank market have a maturity of:

QUESTION 73
A risk manager is analyzing a call option on the GBP with a vega of 0.02. When the perceived future volatility
increases by 1%, the call option