Online Access Free 8004 Practice Test

A VaR model for managing market risk at Barings Bank in London would most likely have:

• A.Helped very little as Nick Leeson hid many trades
• B.Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics
• C.Alerted senior management to the problems before the major losses occurred
• D.Been used if senior management had ever seen it

The early 2003 trading strategy of China Aviation oil was

• A.to buy puts and sell calls
• B.to sell puts and buy calls
• C.to sell calls and buy puts
• D.to buy calls and sell puts

Which of the following should NOT be part of the Risk Management Infrastructure?

• A.Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms
• B.Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting
• C.Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole
• D.Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader

Which of the following was NOT a factor in the Long Term Capital Management case?

• A.Changes/breakdowns in historical correlations
• B.Inadequate separation of front and back offices
• C.Unwinding of liquid positions at the beginning of major losses
• D.Model risk

The failure of Washington Mutual was NOT due to which one of the following?

• A.Using a combination of subprime mortgage loans and credit cards
• B.It failed due to the poor quality of its assets
• C.A run on its deposits by bank customers
• D.Low lending standards and bad quality acquisitions