Returns on two assets show very strong positive linear relationship. Their correlation should be closest to
which of the following choices?

When the cost of gold is $1,100 per bullion and the 3-month forward contract trades at $900, a commodity
trader seeks out arbitrage opportunities in this relationship. To capitalize on any arbitrage opportunities, the
trader could implement which one of the following four strategies?

When trading exotic options, one needs to consider the following risks:
I. Spot foreign exchange risks
II. Forward foreign exchange risks
III. Plain vanilla options risks
IV. Option-specific risks

A bank has a Var estimate of $100 million. It is considering a new transaction which has a correlation of 0.35
with the current portfolio and a standalone VaR estimate of $5 million. What would be the new VaR for the
bank if it carried out the transaction?

Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?