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.

In analyzing the historical performance of a financial product, you are concerned about "fat tails", the
probability of extreme returns compared to realized returns. Which of the following measures should you use
to determine if the product return distribution of the product has "fat tails"?

DeltaFin wants to develop a control scoring method for its RCSA program. Which of the following statements
regarding scoring methods are correct?
I. DeltaFin can develop a control scoring method that assesses both the design and the performance of the
control.
II. DeltaFin can combine the design and performance scores for each control to produce an overall control
effectiveness score.
III. DeltaFin can use the control performance scores to compute an overall risk severity score.
IV. DeltaFin can determine its own appropriate control scoring method.

A large multinational bank is concerned that their duration measures may not be accurate since the yield curve
shifts are not parallel. Which of the following statements would be typically observed regarding variability of
interest rates?

Which one of the following four statements about regulatory capital for a bank is accurate?