Question 41
Which of the following statements are true:
I. Shocks to risk factors should be relative rather than absolute if we wish to avoid a change in the sign of the risk factor.
II. Interest rate shocks are generally modeled as absolute shocks.
III. Shocks to volatility are generally modeled as absolute shocks.
IV. Shocks to market spreads are generally modeled as relative shocks.
I. Shocks to risk factors should be relative rather than absolute if we wish to avoid a change in the sign of the risk factor.
II. Interest rate shocks are generally modeled as absolute shocks.
III. Shocks to volatility are generally modeled as absolute shocks.
IV. Shocks to market spreads are generally modeled as relative shocks.
Question 42
Which of the following is true in relation to a Contingency Funding Plan (CFP)?
I. A CFP is like a disaster recovery plan to deal with a liquidity crisis II. A CFP should consider market stress conditions, but failures of payment systems are not relevant as they fall under the remit of operational risk III. Reputational damage may result if the market finds out that a firm has had to execute its CFP IV. Sources of emergency funding considered in the CFP should include the role of the central bank as the lender of last resort
I. A CFP is like a disaster recovery plan to deal with a liquidity crisis II. A CFP should consider market stress conditions, but failures of payment systems are not relevant as they fall under the remit of operational risk III. Reputational damage may result if the market finds out that a firm has had to execute its CFP IV. Sources of emergency funding considered in the CFP should include the role of the central bank as the lender of last resort
Question 43
Which of the following is not an approach used for stress testing:
Question 44
Which of the following does not affect the credit risk facing a lender institution?
Question 45
For a 10 year interest rate swap, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)