Question 1

Which of the following statements regarding securitization is least accurate?

Options :

A : Securitization enabled the originate-to-distribute banking model.

B : Securitization enables an originating institution to transfer the default risk of the underlying pool of assets.

C : Securitization may allow institutional investors to indirectly hold assets that they are prevented from holding directly.

D : Securitization gives originating banks greater incentive to approve and monitor loans carefully.

Answer: D

Question 2

Which of the following statements is true regarding the mixture of distributions for risk modeling?I. Distributions should never be combined.II. It may be helpful to create a new distribution if the underlying data you are working with does not currently fit a pre-determined distribution.

Options :

A : Both I and II.

B : I only.

C : II only.

D : Neither I nor II.

Answer: C

Question 3

Suppose a bond with a par value of 1000 has coupon payments of 10% per annum and a yield to maturity of5%. If the bond has 4 years to maturity, what is the price of the bond?

Options :

A : 904.97

B : 841.51

C : 3628.22

D : 1177.3

Answer: D

Question 4

In the context of stress testing principles for banks, which of the following statements is correct regarding wrong-way risk? Wrong-way risk emerges when: there are changes in basis between the opening and closing of a futures

Options :

A : market conditions.

B : a company purchases an option on its own stock. the probability of default of counterparties increases as a result of general

C : a decline in an asset value may dry up its liquidity.

D : position.

Answer: A

Question 5

All of the following are reasons that Nick Leeson engaged in aggressive speculative trading in the Barings Bank collapse except:

Options :

A : Barings’ lack of risk management oversight.

B : Barings’ risk management models were awed.

C : he was attempting to recover previous trading losses.

D : his authority over settlement operations allowed him to hide trading losses.

Answer: B

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