代做ERMCPS5390 Final Prep Quiz代做迭代

Quiz: Final Prep Quiz

Final Prep Quiz

Quiz Instructions

There are 10 Multiple Choice and 3 short essay questions in this exam. You will be able to see answers after the due date (Monday 11.59pm).

Final exam might have slightly different format (10 multiple choice 4 or 5 essay etc.)

Question 1 10 pts

The table above summarizes the predictions of a default model using a sample of auto loans.

What is the sensitivity measure for this model?

83.3%

95%

None of these answers are correct

86.4%

62.5%

Question 2 5 pts

Which of the following is not an operational risk?

None of these answers are correct

Internal Fraud

External Fraud

Workplace Safety

System Failure

Question 3 5 pts

Which of the following is a revolving loan?

Credit Cards

None of these answers are correct

Mortgages

Student Loans

Auto Loans

Question 4 5 pts

When measuring the performance of a logit model; True Negative rate is the same as the sensitivity measure.

True

False

Question 5 5 pts

The new regulation on Market Risk, Fundamental Review of Trading Book (FRTB), emphasizes which of the following measure over others?

Expected Shortfall

Value-At-Risk

Expected Loss

Stressed Value-At-Risk

Stressed Expected Shortfall

None of these answers are correct

Question 6 5 pts

Vega is the sensitivity of a call option price to the volatility of stock returns.

True

False

Question 7 10 pts

Suppose that an August 2021 Call Option to buy a share of a technology stock for $500 costs $20, and it is held until maturity. Under which conditions will this option be exercised?

If the price exceeds $500

None of these answers are correct

If the price is $480

If the price is lower than $500

If the price is lower than $480

If the price exceeds $520

Question 8 10 pts

On August 15, 2021, Bank A enters into a swap agreement with Bank B, where Bank A agrees to receive the ongoing market rate (floating leg, LIBOR) in the future (2023 to 2028), and pay an agreed fixed rate. If the interest rates drop to lower levels than expected in the future (due to further Quantitative Easing), what happens to the Credit Exposure of Bank A due to this transaction?

Increases

Decreases

None of these answers are correct

Remains Unchanged

Question 9 10 pts

The one-year loss distributions for market risk, credit risk, and operational risk are very similar.

True

False

Question 10 10 pts

Please explain the concept of RAROC, and how the major risks are aggregated within a bank?

Question 11 5 pts

Assume that your bank underwrote 5 loans to various hedge funds based in Cayman Islands each valued at $1M. The PDs (1% each) of each hedge fund are independent of each other and follow a binomial distribution. Assume that recovery rate is 70% for each loan. What is the 99% Credit Value at Risk (CVAR)?

None of these answers are correct

$1M

$0.7M

$1.3M

$1.7M

$0.3M

Question 12 10 pts

Suppose that you have a portfolio that is equally invested in 3 stocks with volatilities of 20% each. What would be the volatility of the portfolio if the correlation among the stock1 and stock2 is 0.5, stock 1 and stock3 is -0.5, and stock2 and stock3 is zero? Please show the steps on how you arrived at the final number.

Question 13 10 pts

Suppose that a Bank Holding Company (BHC) has a homogeneous portfolio of sub-investment grade sovereign loans, and uses the advanced approach to compute its capital requirements. During normal times, the bank estimates the risk parameters as PD=2%, LGD=30%, EAD=$10billion, and Maturity Adjustment as 1. Using Vasicek formula, the Bank also estimates a Worst Case Default Rate (WCDR) of 5% at 99.9% level, and a downturn LGD of 40%. If everything else is equal during downturn, what is the capital requirements for this portfolio? How about the Risk Weighted Assets?