Free 2016-FRR Exam Braindumps
Financial Risk and Regulation (FRR) Series Questions 61–65 (page: 34)

The probability of default on a bond is 3%, and in the case of default, investors expect to lose 70% of their investment. The bond's risk premium is 1.9%. The expected loss and the credit spread of the bond are, respectively:

Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?

Which of the following statements describes correctly the objectives of position mapping ?

An options trader for a large institutional investor takes a long equity option position.
Which of the following risks need to be considered when taking this position?
I) All the risks of underlying equities
II) Perceived volatility changes
III) Future dividends yields
IV) Risk-free interest rates

Banks duration match their assets and liabilities to manage their interest risk in their banking book. Currently, the bank's assets and liabilities both have a duration of 10. To hedge against the risk of decreasing interest rates, the bank should
I) Increase the duration of the liabilities
II) Increase the duration of the assets
III) Decrease the duration of the liabilities
IV) Decrease the duration of the assets