Online Access Free ICBRR Practice Test

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?

• A.Short-sell physical gold and take a long position in the futures contract
• B.Take long positions in both physical gold and futures contract
• C.Short-sell both physical gold and futures contract
• D.Take a long position in physical gold and short-sell the futures contract

James Johnson has a $1 million long position in ThetaGroup with a VaR of 0.3 million, and $1 million long position in VolgaCorp with a VaR of 0.4 million. The returns of the two companies have zero correlation. What is the portfolio VaR?

• A.$0.4 million
• B.$1 million
• C.$0.5 million
• D.$0.7 million

Since most consumers of natural gas do not have the ability to store it, they contract with gas suppliers to receive a flow of natural gas equal to a specific number of MMBT's per day (MMBT is millions of British Termal Units, the unit in which gas futures are quoted on the
U.S.
markets). To protect against price increases with a bank, the natural gas consumer, concerned with the average price over the course of the month, will use the following contracts:

• A.Compound options
• B.Asian options
• C.American options
• D.Flexible volume options

Which one of the following statements is an advantage of using implied volatility as an input when calculating VaR?

• A.Current market data is used to determine implied volatilities, which makes them forward looking measures
• B.Implied volatility assumes volatilities are constant which makes it easy to implement in models.
• C.Implied volatilities are better at predicting actual volatilities
• D.Loss probabilities from the standard normal distribution are used to compute implied volatilities, which makes it easy to compute the.

Which one of the following statements describes Macauley's duration?

• A.The change in value of a bond when yields increase by 1 basis point.
• B.The present value of the future cash flows of a bond calculated at a yield equal to 1%.
• C.The weighted average life of the bond payments.
• D.The percentage change in a bond price when the yields change by 1%.