Question 1

Which one of the following is a typical source of funding for a commercial banks assets?

Options :

A : Consumer deposits

B : Cash

C : Commercial lending

D : Commodities markets

Answer: A

Question 2

Which one of the following four statements represents a possible disadvantage of usingtotal return swap to manage equity portfolio risks?

Options :

A : Similar to the formal portfolio rebalancing strategy, the total return receiver needs tomodify the size of the trading position.

B : The total return receiver needs to incur the transaction costs of establishing an equityposition.

C : Similar to an equity forward position, the total return receiver does not get paid thedividend.

D : The total return receiver does not have any voting rights.

Answer: C

Question 3

What is a common implicit assumption that is made when computing VaR using parametricmethods?

Options :

A : The expected returns are constant, but the standard deviation changes over time.

B : The standard deviations of returns are constant, but the mean changes over time.

C : The mean of and the standard deviations of returns are both constant.

D : The mean and standard deviation of returns change periodically in response to crises.

Answer: C

Question 4

To reduce the variability of net interest income, Gamma Bank can swap positions thatmake its duration gap equal to

Options :

A : 0

B : 1

C : -1

D : 0.5

Answer: A

Question 5

The value of which one of the following four option types is typically dependent on both the final price of its underlying asset and its own price history?

Options :

A : Stout options

B : Power options

C : Chooser options

D : Basket options

Answer: D