Question 1

Which of the following statements most accurately reflects the time horizons typically used for market VaR and credit VaR calculations?

Options :

A : Market risk VaR is calculated over a longer time period than credit risk VaR.

B : Credit risk VaR is calculated over a longer time period than market risk VaR.

C : Both are calculated for one day.

D : Both are calculated for one year.

Answer: B

Question 2

An investment bank has a one-way credit support annex (CSA) on a bilateral transaction with a hedge fund counterparty. Under the terms of the CSA, the mark-to-market value of the transaction forms the basis of the hedge fund’s collateral requirements, which are provided below:Value (CNY)Mark-to-market value of net exposure 25,000,000Mark-to-market value of collateral posted 10,800,000Threshold amount 14,000,000Minimum transfer amount 2,500,000Rounding amount 10,000Assuming the net exposure increases to CNY 27,000,000 and the mark-to-market value of collateral posted has not changed, how much additional collateral will the hedge fund have to post?

Options :

A : CNY 2,000,000

B : CNY 1,990,000

C : CNY 0

D : CNY 2,500,000

Answer: C

Question 3

Time steps that enter into the calculation of the number of days in the margin period of risk include all of the following except:

Options :

A : valuation/margin call.

B : settlement.

C : close-out and re-hedge.

D : posting collateral.

Answer: D

Question 4

Which of the following statements best describes the benefit of netting risk exposures?The benefits of netting are realized when:

Options :

A : marked-to-market (MtM) values have opposite signs for two trades.

B : expected exposure (EE) values are minimal.

C : marked-to-market (MtM) values have high structural correlations for two trades.

D : expected future exposure (EFE) values have zero correlation.

Answer: A

Question 5

An analyst at a commercial bank is evaluating how the bank applies historicalsimulation (HS) to estimate VaR and ES. The analyst focuses on the approachesused for weighting past return observations, including the age-weighted, volatilityweighted,correlation-weighted, and filtered HS approaches. Which of the followingstatements is correct regarding the given weighting approach?

Options :

A : customized based on day of the week, magnitude of return, or any other

B : portfolio returns so that these returns reflect current volatilities and current correlations.

C : increasing them if the historical volatility forecast was higher than the current

D : the cutoff date are given an equal weight while observations that occurred before

Answer: B

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