Which of the following methods is a means of credit risk mitigation?

Answer(s): B

Which of the following scenarios offer an example of wrong way risk?

A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank
A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level
A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels
A bank enters into a receiver’s swap while interest rates are increasing

Answer(s): A

Which of the following is typical of liquid assets held by banks under prudential requirements?

Answer(s): A

What is the correct interpretation of a EUR 2,000,000.00 overnight VaR figure with a 97% confidence level?

A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days.
A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days.
A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days.
A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

Answer(s): C

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