QUESTION: 13 Exam Topic: 1, Volume A 100 Questions

A credit analyst wants to determine if her bank is taking too much credit risk.
Which one of the following four strategies will typically provide the most convenient approach to quantify the credit risk exposure for the bank?

Assessing aggregate exposure at default at various time points and at various confidence levels
Simplifying individual credit exposures so that they can be combined into a simplified expression of portfolio risk for the bank
Using stress testing techniques to forecast underlying macroeconomic factors and bank's idiosyncratic risks
Analyzing distribution of bank's credit losses and mapping credit risks at various statistical levels

Answer(s): A

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QUESTION: 14 Exam Topic: 1, Volume A 100 Questions

Typically, which one of the following four option risk measures will be used to determine the number of options to use to hedge the underlying position?

Vega
Rho
Delta
Theta

Answer(s): C

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QUESTION: 15 Exam Topic: 1, Volume A 100 Questions

What is the explanation offered by the liquidity preference theory for the upward sloping yield curve shape?

The long term rates must rise enough to get some borrowers to borrow short-term and some lenders to lend long-term.
The long term rates must rise enough to get some borrowers to borrow long-term and some lenders to lend short-term.
The short term rates must rise enough to get some borrowers to borrow short-term and some lenders to lend long-term.
The short term rates must fall enough to get some borrowers to borrow long-term and some lenders to lend short-term.

Answer(s): A

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