Free ICBRR Exam Braindumps (page: 50)

Unico Bank, concerned with managing the risk of its trading strategies, wants to implement the trading strategy that exposes the bank to the lowest market risk.
Which one of the following four strategies should Unico take to limit its risk exposure?

Short-selling is typically associated with the following risks:

I) Potential for extreme losses
II) Risk associated with the availability of shares to borrow
III) Market behavior risk
IV) Liquidity risk

To achieve leverage in long positions, a bank can use the following strategy:

I) Securities may be purchased with borrowed funds using a bank loan from the broker.
II) Securities may be borrowed on margin by taking a loan from a broker.
III) Securities may be purchased and used in a repo transaction to generate cash for further security purchases.
IV) The bank may enter into a derivative transaction, such as a total return swap, that requires little to no collateral but mimics the performance of a long or short position in the underlying instrument.

In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may borrow up to ___ of the value of the securities from their brokers.