ilSeren 1 aoton produces continuous pao pele, reaing ha fe pay does ot crease cr ‘lerone contra tn to undeyng asst ale? 1 Create options Barer oats 4. Looxboch options Question 2 ert erat of he Canin dl for he U.S. doar can ete fo one of wo posse values The met cr win eal patent. Te able bow shows he pose vahies or he US, doar Stone Se nt Cpgmn sf U8 Sr mF, en pecans alarms re saad vt comet —Faeoaa09 00000 up 1 s000000 9000900 Bown ‘ssoooo00 ean E{CADIUSD Rate = VERUSDICAD Rae) Flosb(cAD Rate 2 HEICADUSD Rate] ELUSOIGAD Rate VEICADIUSD Rate E[GADIUSD Rate = ELUSDICAD Rate‘Answer questions 3 and 4 based on the following information, ‘rah manager tor ABC Bank has comple the etlowy ta regarcng a bend adler and an equity ater Assume Balto tuts ae normaly date and tat are or $2 racing weuks pee your ‘NBC Bank computes is captl ung 699% VaR The ater lax po reste ‘ABC Benk Data - USD mitions| eta NetBank vies Tax Prof Markt Valve Vola Rae Usb 11% a0 Us iGo Nse dom 224% cass. esa 1 The equty wader has on anual, atarax VaR at 890% cnfdence level of USO 522 maton. | In comparing the RAROS fr both wader, the equity ror prorming beter than the bond wader 2 tony © tom © BomQuestions The slandwine economic capt requirements for iaurance comparies canbe trokan down ito tres ‘map ak cers edt tok, manGUALM Mok and operating and her fk. Ansieing the patos ot ie iur PSC inure» Sheraed mau, and’ pape) sure the nest MATOLALM isk Pacinairer rer rere Proper insure uration 6 Sampany XYZ pansion tad Nae abies of USD 100 mien and asaate of USO 120 milon. The Shum grow le habits Noo an expected ve oS wn 3% wai The anal eu te ‘tsea nos on expected vue f Bn 12% vty. The coreaten between asset ret and Yt ‘row ia0.3 Waa tho SS aural? Us0 276 mon 180 227 men 1680 $38 miion Question 7 Conier an aequty fr with equity aptalzaen of USO 2 billn. The fet CFO considers te ‘Stow twos ancng sages 1. maue zero-coupon sono det wah pincpal amount of USO 1 bien payabio in 10 yers ans purchase renee Tr USD 100 ron tat il fay losses onthe tenor debe restore ‘cee of USD 500 maton 2. leew sr-coupon unr dbt wih piney amount cf USD 500 mon payable 10 yoars and Iss zero-coupon nemo set wth peel ameunt of USD 500 mllon payate' 10 years 2 hue ser-couon snot deb wn prrcpal amu of USD ton payable 10 years ih 9 i opin atarned tat ges evesos fe gh 12 pu the det ie fr a matty for ro frnepa! amon! “nc of hee state would have he mes! ay ser deb? satay Seateay 2 Satay 3 Simo debt oan rakyin a ee sates‘Gamma lusies. ic sues an verse footer wih a lace vat of USO 50,000,000 that rays 3 ‘Sram! coupon oi St mus IBOR. Gara Indies ie to exec tape stteoy ‘Spon rae of 6 7% 3 yar ana tan hodoe te tak by ‘nasines recone auc Hom a swap desir wih axe ate of 7 and 9 Nong ate of IOUT Vint woul be ems spcpa pe swap Gana dsc or Pa fe 2. Paynes receive ed swap. voting rece ioa swap. © Pays recov fog sap, ‘5 Tharokcamot be hedged min swap, uration 9. ‘porto manager enters no aot rate fret Sapa te tl oun receiver, Under wh of te {owng stuatons woud be poche managers requ io axe 8 netoulay a coun {ine wore a cpl gm ono ereacesosen =? "=" 'SSA Ee marel veo te ference tase dread inca ‘he speadbetoen eeenc ase and We Sencar aust changed Question 10, ‘nic of te folowing statements abou combing mal ik ar incre? |. a pesto sow a have consierabie model ek, an can Kt is expo by Ipoing gti pssion ha 1 we aaya choot the model hat aes lo acount he lgast numberof ra ‘eo far ot act pres hss exposure to mode ik wl be veda wenn rear ses etn ares oa he voy, alaton a 1. ik managers ick be Wada re Mods 10 ensure that model altro updosale ond tht models are upgraded i tne win marke best pracaca tno ens that cose model are Sethe nd tahen oto use © ta‘cn pe of detrbuten produces the lowest probably fra valet exceed a speci exteme ‘elue %arich i greater an te mean, assuming the Gatton al have the sn ean ‘epoturte etbon wat a knoseo ‘lepohurte etnbon wah a hurts 8 A pature sibton ‘ueation 12 ‘knimancan veto nots porto of French stocks, The matt vai of the pata is €10 ao, ‘Steaboto 135 reutve ote CAC fox In Novem, he pot ao ofthe CAC Inox 730. The ‘ichanga aes USD 125% The con yo ar wrest es an Solr terest rates ar a eq SSR tte on epon artes wea mont pope ome! prio aunt March Euro ons al peas n US dots per €) Se tae eae 14 Buy cats wan 0 pramium of SO 180,000, £47 push a promium of SD 220,00, Soles ith a premium of USD 180.000. 1S Setpute win promm of USO 220,000 ouestion 13, Ig atemgt prone guidance onthe akira saps be akan by he priate sacor promt the ‘cacy atecveness an sabi oe plo! inane sytem, te Caumtrpory Fak Management otcy Group I [ERMPC I) pblshed a reper i ay 2008 contang recormendons and acing fpichle Acoing fo the CRMC I ror nh of Be flowing sttomertsreting 10 Emerging fil ecorect™ 1 CRMPG i recommands that cis aking ons assocad wih compos procls ‘Sout have tasty Yo agrogte nat ates thor one pol at Sete m order 1 rcaratns pro level npn ». CRIPC I recommends Mat hasge finds, on 2 vlunary bass, adopt we relevant FRecommanastons ana Gating Pcs eontnes the (CRRIPG il rope he a gudng prncaa inating stucured produce i raat tenors, feancal ‘termeores shold consi whahwr dcsure appropri corey he fact Pal coma mart vale, st matty tase han he su pce 44 ke'n'gudng pracple|somee maragemant shows conduc panoce Feviews of the FlonoSt etsmnasary® lama! Conte forthe eno Bf comple produce TortaVic Satomen best oescoescoalatens ore varancasin tes of Manca ie? 4. Thee ae oy margnal changes in cormlatons ae vanances in Snes of css. and Ireolt they done nwa te lacred erat manager. The dveritcaton benef Goervare bache Corans nerease, and therelore yout The daacaton beats intense because coaatens decrease, and herfore your 4. VaR etinates using the Fishnets approach prove fr he aici of meraand armas mg pot cas, nd erry a wach faced Cre ‘Question 15 ‘inet an ort ft ty conc mo pes ea» em 2% aan ‘mont ang he st oar an 3% each mans uring he secon year What he magia! obobsy ‘Taetaatng overt sacand year, contors on na Paving deat the Ws year ‘lutte norman tarsi te queson © Soom 6 oa veetion 16. ‘Sen wo random arabes X and , what the Variance of X givin Vaiancs¥] = 10, VarnceliX~3¥]= 2.700 and he conslatontabecon and ¥i8 08? 2 199, 4 250 uastion 17. ‘pote as an average et ovr te last yor of 132% ts benchmark has provided an average atom ovr the some period of 123%. The porns standard Sovaton fe 183% fe bela 1540 tocting ear volt 63% and ts somstandaréGevaion 90% sty the see rae fe (Conta porate’ ormaton Aa (F) bors bieCareers t-monh fituresconract on he SAP 500, and suppose tat fhe curt value of he indo is hat he idond yale 1 3 annual fr te socks unger tho don and Mat the etsy sompuunded shee erst saa. annual. What he aul Cost ary fo ths uestion 18, aoe Frid ieltowig risks tind 9 Base eon of peratonal sk? aga Rik Reputation Ris Process Fate isk SyaeaFature ik uwation 20, ‘inch of be akonny reacn() a ret exonue by shortening the elective matty ofa posion? uestion 21 1. ui pu. 1 Great nage. ‘0h! a Tay Way Neer net Aint ee sural ate athe of te years. he annual Seto probabites ae 8%, 12% and ‘inte ha second and tr eas respecive? oe csouestion 2. Vic te fotoning statmnis abot Eateme Voie Ther (SVT) a sppcaton Vata ick 1 EVE oands the Cantal Umit Theorem to the detibuion of the tats of Indepenet. Workcay stbuted random varabis dawn om an wh 1 For empaical sock market dat, Be shape paranar EVT i ngatve, noting {as that appear ore apy tana oral sarauon 1. Evr can alp avd 3 shoncoming of the hstrea matin meat, when may ave ecuy cla Vat aby elo sc eats te ‘Question 24 ‘ovens easenes tat he mare pce of al option USD 5 Nr an the tore! pce ‘tthe onc otro ne aret ice Sapa opine eine cs Seay eons Proms me! ssa ere no ene tora” eee 4 The mara ice wi be higher ante eel pce by USO 5 ‘he markt pe nibs higher hae eset pis by sn snout ower han USO 5, ‘The markt pe i be lower anne tworete ey US 8 ‘The mort pce nil be ome ane aoe! ps yan arcu awer han USO 5Sh DataSat Corporation has an employee pension scheme wh xed labs and 3 ang time horizon ‘etceang s yourg ware, The nds eso ae USD bien ara the poset vie ois habits Usp evan ‘nich of the febonog salemnts re income? |. Ta present valve of long-term fied payments behaves vary much he 8 ong esi na fae le bord 1 Ecru at Pk maowue of rear rk Ii. The Detach Corpraon wa be sia Hrmunice ts Lbs by mvestng USD 8 ‘on ong resto Bonde. «The ofa ut ede soa cash ina reserve accunt to abso crt sees & Kccetsaton vansacon caves up the cath fee gonorto Wor the astt pool ino The mites payments and ote ees rcv on teases he pool exceed the itvest payment mase onthe sesetbeded scurly (ABS) pls te ee pa 0 service {he'mts song mt mscllnwacs expenses. 4. Theva of he seve inthe foo exceed te amount of aset-bachas Secu (ABS) Inve Question 2. inne Bon Stancartzes Approach fr operational, me bea factor saves as ‘alte ne rbtonc taser tne operator malas experence for gen bsiest Ie ‘Shpall of gross care for at busnans Ina Which of bs folowing buenos rot bean ctor Seca ‘mera ungQuestion 28. ‘Gris doe dnence vit the manager of an atrage fg ncame tnd cams hat his und has vty ow ‘ein you hat fond invests mopage sacked re footer suede US. The erent ‘te oth ng poaon ofthe ues ough SO TOD mon Typcay, th un buys ere fers ta ar Undered and edges am so hatte poston hot sone to eres re chases ing te nearest matty res cract an te TayearT-ole The fn caphres t ailerncy Eeneen th mers floater andthe edge porto wher pts ane poston Yau ar a te oly ‘he concer about wes when fund ho sl ts hodged poatan He tas hs TEA eh ‘ch of ne eowng ks mol Gscuned by the manager San sgntcany ae tert one Ree | Made ik because te propaymon mode used by e nd mighbe weg, "et faa Pca ey arses al ere Boa Nave no 1 Ugur secous he hedge hn uses the nearest Ktves contac onto 10- ex fag ete tak at sy aye bw one st 1v. Veluty nak because stocks ones ala volt wi tet e inveree floaters butcanet yea be hedge wine ioyene Tot cnect Question 2, ‘eksnera! deta probabaty and rt-wor (rp deat probably ae used na anata of Sragok Which ow the wlowng statment cr eves cee 1 Reakword daft pebaily shoud be used in soanaranayses of potnt tce ‘otto tom cfaut and esos dolautgrobtnty shou aso be eset evoking ». rabworlé fut pobsblily chou ba used in acenano anaes of pont Kice ‘once tom dolauta but k-naual deta pobasity shut De used in vauing coat ¢ Reteneo!detaut probbity shout be used in scenario analyses of sok re lone hom lal and tect eta roby shou tle be sod nwa «Retinal deau probabey shoul bo used in scenao anatase of ptt ure ‘oes Pom gta but rato la ponatty shit ae bese aanguesvon 30 erties compte ne allowing intraton on 9 ports Sorin Ratio 0.82 Bea 118 tn 122% Stand dewaton 164% Bonchrancretn 11350 “vali te semistandrd devon of he pet's en? Part Question 34, Jere natementing # porto nara satey sing Inox tes designe to rote! he vue of onto of soaks not pay any dase. Assuming fe value you shoes porto decreases, wich de wuts eu mae pee you porto? | Buy an amount of ihn aqialet 10 the chango i te call ls times te (haat prtoto vate Std’ ancunt of ndex ates squvaint the change te call dea tines He orga otto vice «Boyan tnaun ot ngex tees equvatnt othe change ine pu castes he orga fone vate «4 Stoneman ot ndox tres equivalent the change ine pu dts tras ne ora peta wove‘Yo a responsble for determining te 2 of nen feet sto ow hedge fan. Select be ‘iene teow that evens amor your Gaon making process | Shee your bank 9 prime tok, you balove Mat yoU Nave a comple Wew ofthe {us postions Use lrmaton fom these poston, you brs ta hehe as ‘> dai. Terlore, you cocuse hal he abvence of att shows you to eens per ie ef reat an te in ao eb >. The hea und provides you wih 3 VaR esta ts appeaon. The fund states Bat {te Val estate bined using he Mitre method wk cata or the pevous your You conn that you reed mote ntmation tt tertan of fake of ‘ndge tnd because the provous yer had no sveme tucemes or he Ro aos at ‘osrown to afloat he setogy fe haga hn «The ons satogy moles thing postions i qu asses. Te leads you 10 be wing {Desond mere crt han you woul ase 14 Then hana hgh watermark. Tho fond a ot money and wit requke an exert ‘hgh peomance fo Bw managers f the fn to sncred Me hgh wae a You ‘oveie at is stuabon resent referenda new ret nao he nd ovation 33. us = ‘Slave, market eek manager at Marco Sacut, ¢anaying th Fk of S8PSOO Index options ‘oding desk as Wok repo shows the desk i net ong gars and tht voge. Which of he eacrong artes of optons shows exposes consent wth ha fpr? ‘> The desk has substan long exp lng cal postion and substantial shor expy shot utpotions > Thageak has substantia ng explora pu positions an substantia exp shst al ceaene « Th'dsk nas substan ong ey long cal postions and substantial short exp short eins «4. Th dat has sutstnl short exp lng eal poslions and subtartlang expy sort atposton ico he fling statements corey descrbes te properties of operatena rk management Key tek neaos ae sutoctve meataes at allow th isk manager o forecast sss ‘Cava neaont use coker pebaivs, ‘ewan mel egure aocoun metocgy ngs vty models os uaasc'y fr macroeconom ike‘vestion 5 RSdpormeni soe cain Nae 2 Bt raing fom Moots and 9 Br rating tom SEP. balance sheet ‘sinc’ age numer of racevatles at shoppers who wae be chains ps bel reat card. The {ims decend i race mach ned ance frenowabon by Sacutenng Nase YecoNanes. WMC ot ‘otchowng seanarae i the most aly outcome” 1 Te bond saued inte securticaon wil Le B1/B* ated becouse to department soe hanated 8186 Thesis (85 lhe x an che ht td anton ya The atatbacked secu (ABS) wil be overclteraized wih he vecawvabies Pat hag {oon on tw hms Balance sheet ‘and brow a sab othe specal purpose ery (see). «4. The securzation wat esto a bond wih tw tranches: one that sence od eaves 3 (s5906 tng and ance ot nr and veces 8 BI Question 36, ‘ich ote ftoving GARCH models wl ake We shoest me o ever tos ong ale? 2. 005+ 00%, +0965, 8 R003 + boar, +09sn, @ 2002 +0017) +097, 4G NZont oats +09, vestion 38. ‘Sipps rate on 1-year zro-cougon comporate bonds 13.5% andthe imp probity f deta tees Resume LGD's 100% Babed on he pve formation, the year ates Cosest 2 449% 8 Soom Patyuestion 39. | Sergiy ‘Bonn paris are alone 1 walk away or the contact in hs evant feta {wa bistealconvacs t's spec hat ot Stauth or-etauling arty ets gains and loses the deluling counterparty 'o singe payment or al overed Fanci mart contacts can be ‘erinaed wson an event of dtu prior 1 the ‘ansupcy proces. ‘Obioatons are meters wit tars Ratiletics EWIMA model wih 9 decay factor = 0.9510 develop forecast of he asa hch weg wo be appnd hw ahr at Saye Question 0000 ry cr) ‘atace, sr emerging mart bod vade. shaking a Sea USD Malaysian corporate tod inns book, Nels ances stow hank fh postion When of Re ling satranisconcomng eat oo poston sincorec? “Te corporate bond could to upgrded so Mat M woul have a higher rang than ‘Mayan sovereign debt, Cutt ag eey ‘Baym protecton win 3 COS woud Redge We corpora bond fosion against some ral fom pe ang tm poston thee py ‘Xtra gonton tings sovereign bond tom Malaysia wo! aay help hedge he ‘argoae bond apa! curoey isk he corporation tan exeatar 1 shor soso fa S-yen US. easy amd buying pocaon ante corporate bond ‘tng a EDS woul be a bb hedge a st buyg plone coyparats ton(incr one olowng mangagetacked secures has a negate dation? 4. lnerestaniy sips (0). © Notgoge pase tou 4 Pipe stip PO) ‘Question 44, Sheva ne ccuronce of sgnticontcilerence between te maks-maa valve ofa comp Merge maven and he pea at wach ne sare Isment me reveatad to have waded he ‘mana ele = © Mantra ik ‘ ‘weston 4, cro manager waist hedge his bord polo aaa changes tees las. He ions 1 Pett cmon wih ste ie below the paroles cute poo in eer fo protect agaist ving Trieste Ho ato waie wo sl eal opton wn ska pee above the polos curent pie i (ror vee fh Sn a ying te put open. What satay stn anager sng? Bear apes nae alr aere uestion 46, ‘nh of flowing statment tou: ret rsk models conect? 1 KMV models ler @ sucha approach to mesouing cred Wak tat 6 based on credit », Grtfaks mode ofr an sca! approach © measuring ret ik ha eats the aneupcy and recovorypocessox a5 erdogonaus Eh mods are an tans of Mtr’ Optom ping mel employing eauty pce eto apoyo ast pe vty 4 Create models. the Be feducnorm model, use 9 chvsquaed dstbuton 10“Stes act etm on capt RAROC) fr 2 project's 14%, the rake ‘marae 13% ra the hms egy beta 12. Using aun RAROC. he pj shad 8c acupid and he ated RAROC i 10% © Be acento andthe achsted RAROC 80.39% © Note sceoplad and he acuctog RAROG 10%. 4 Notte seeoplod and he ested RAROG 033%, on SE at ins hi yore es pr Sots anaes cree geet oe areas ‘Ses ub win the on eae Y ede 15K 412K 49K Sum ot squared pression [SSR] = 96976. ‘Sum of square eer (998) =22 12 Detemine wnat proportion of sae prow explain bye regression ress, B88 Question 4, [Compony ¥has assets vated at USD 206 mllon. The wake as shor erm debts USO 28 mon. ‘oat ale” stoner abt 6 USD 115 main, andthe vey of fe asses USD 8 miler Cate re dtanc detaat ung fe KM ngproach 135‘Question 50 ‘Sipose tne dy reune of portico and a benchmark porto iis epating area lows: Ponte Ratu ops) Benchmark Pato Retr (bes) bay a 0 bay? 2 ar aya ton to2 ay 70 70 ‘naib wackag er ovr the fury prod? Question 5 ot re gn he floning wlomaton about an nares rat 54a year tom Seana payment Faeoram = 6% Flontng rate = LIGOR +50 basi pots ton! prncpal USD 10 maion Caleta net coupon exchange or eft pod i LIBOR & 5% a te beginning othe paad ant 53x tie ond ote pono Question 52. ease aye pays USO 0 ‘aa payer bys USO 26000, ‘ada payer pays USD 20000, ad ate payerocaies USD 25.000, ‘inch of ie ftoving fea Utaton of ving the Capital Asset Prieng Model to measure equity regarenens br operatona’ rik Measurement rin soparaey measuring levered 9nd uve ot Tn ngs varaton ie tn a Yegucon bong footed estonia bea estates Fequres dead hrowiodge of om sd ies accounting to go wom bea to speci Imansise of peratonat a Mote aboveunetion 5, imine bat a portotp undrporaimed ts benchmark by 2% n the most cont month Which of ho Totowng Sateen about apa n ha Scenanoss corec 1. Alphas 24" as trees to he oupedomancedndeperemance sop © te to underprtomance, ghastly negsve an cannot be pave 5 eta on oan opens oh Ss 16 Compared to. an aethesmanay Evopeansied cal opton, an outotthe money Euiogeanstyed ator wih oe ane ep and ein ay hw 9 ele! ueaion 55, ‘Yolen te toning norman touts porto and ae ath to make 2 recommendation abeut Pow east ha orton 0 mprove heen raat cr 4 grant sunset | carne | She Megat Magia Sg ih soo | “sesn’ _Seiuace | Sige | etcee Sete’ “ae MRE catia ne_| Sore “tere | sors | an, ch oo ftlowing recommendations wi inprove the ret eadet of he got? Inrease he aeatons to atsots 1 and 3 and decreas he atcatneoassts 2 and Inreoe the aleatinsoaests 2 and and Serene he toate te ssets 1 andsees aenenseanga prot ater atay Oats ENemgeanarremus siento Seca te ea eee mmm roe nae es ee mite tees were armen romat one omer as Sirota uso 97,027, sb 105543, Cannot be catarmed ue 1 nsucant data ‘uestion 57. Xononng you have agit! can showing hoa! ats vo gen nancial variable 9 Forex ta) how cout you arf a ck eso he vay of he power aw Pob(v>.0)= A where xe [age at + pond mode! ofthe a of e dsbbuton? 1. Poti proba ov exceeding x standart deaons agains Pete prosaniy of v exceeding «sr detaons aps og of Plt fg of he posal excsoang x sarsra ovatone sane! = ‘Plt ig ot me protabity of vexcaeaing «standard evatens apanst ee o ovation 8. ‘Theveur he socks ove the st yea ge porto flow adsrouton tats approxima ‘tora Ar unatnalansyet removes Loma of he say wort peromng sock and proauees ropes ‘etna an ne atered poi rtiens. Wien oe olny about ie euro te tered porto re core |The asreaten ot returns of he teres proto ely be pose shewec ‘ie tration o reams he alred porto ikl be negate skews. A_The mean et kyo be ower compared woe ogra porto. IV) The media seuen tay to behigher compared the one! porto,‘le bing equa when ofthe atoning pans would cost mor tan pli veri oton that are Gereny ate money? 1 Bamer opto. Ian opbone. WW. Shecser opts vy tana hilsed Conte’ an aset worth USD 1 mon whose US prcrtie VaR is USO 10,00 {copuied using the Darmeti meod assuring a normal Setbutor). Suppose Wer -ak spr whch so nay ‘Smite on aaa has ston ef USD 0 0 ana sanded devon of USD 030 What the 33 eared acsted Va assuming he aot ish Vat and he Quy ek ar uceaed? ‘2. us0 200 000| ® Usb 344 000 © Usb 307000 ‘4. Usp eet 000| ‘uration a5 nats the ve oe pores DVO" (dor ale o bas pon? 201ene Sana Bonk, having capt base of USD 509 mon, nants tn ts loess in the eneray SSEur'p oi ana he constuction sete to 45% oft capia. The LGD rte fore energy ond ‘SSeervcbon sears are, ospocinay. 19% and 70%. Saya Bark wants to sey hore to ‘Shcensaton tnt ple, he suru perme loan amount tbe energy and eonsvuebon secs wil ‘uestion 63. ‘ensray Sonstuctin GSE maton 685-52 mtn Usb 13.mlion USD 15. muon Uso 37Smiion USO 77 8muson 1080 320 millon USD 22Smen ise imal Ringe Based approach of he Basel Accent for secizalon exposures. 10 which ‘fe tolowing aes "Pannoss of expose” re’? ucstion 64. ‘The average “ruber of year” he bank has Been assocteg wih the Borrower 25 3 ‘onde {he rato ofthe “rominl sie of he anche oferea” to “he notional amount ‘iporres ne oo! ‘The ato of te ‘amount ofa securtieaton exposures subordnato to the wanche in (qeston fone amount of eponies mw ool” {fe average "amount of he srposre(taatonal 10 the goup of borowers in he pos converted 1 906 (Benty the ncorect statement regnrcing the ordnary les squares (OLS) rgresson assumptions: ue to hataoacedaseiy, estmatad coeficens and the standard rors become Bopee variates ote cause am-corelation Pratl cooonantanayes can ba uae 1 remove he eects the multotinoary as faveial components ae uncoated Sitar store‘ueation 65, [sume tat Akahaya Bank hs loan win 2 pnp amu of USD 100 milion outstanding o Bea Sine mama tom now, an Be ian has present vue 94 USO 100 51 mon. Bra Secrest lity to meets payment schedule. and Alchaya Bork smmedatly nagotas 4 mayen ‘ereuetuing agement ihe on rs Pindpal repayment tet to 2 years Coane (fw pd arly Upton ee ‘base pont ‘lahaja Banks dscountete: 8% ‘Gorantns an epee Nene ‘oso on te gen maton, Abshaya Ban's conetsoaity clos to: Uso 408 lon ‘6 US0 3 58mlon unetion ss ‘iia fe otowng saaments best desert he process of “omwouon” in he cates a specie ‘opicaton? 1 Syomataty carting th rosbity at 8 anda vrei 8 an oF eal a lnponabie ve Totnes amg on comping fey 4 Compra» requney and Severty Sakon an agargat les dtuon spor ae afecte in erent ways when the pce ofthe ean currency in tho curency of he ‘uponer changes Wich oe alow stots proves he mun bane a expr? laste demand athe vi of rig cureey ses. 8 Inte dma a he va of fn caren), © Inte soma a the vam a fran cree) aes “1 lose demand ashe vv lg Cavey feueetin 8 Shove o some hedge fund sralages sconmony ores wih mo payot of option satogae. The Dov ang ok bar sade careponds best to payee ‘ona oowing satay 1 taos-ncae abttoe svatngy ‘ eedoncame emergence Seateay 2 toreciraaing Sratoar 1 Boma and & Satter, random variable baba 1 an 1 so hate tana deviation of x8 ‘077 tat prcrlage he dato vos wi be lesan 196 sanarddoveton above he mean? 100% oon Inston internation rodeWc a he olowng sateen abut he Sorin rato ae vai? |The Sone rato is more apropaeforazyrmetical een dsrbvons IT Sorina rato compares he pol retrn oth run of Benchmark porto 1M. The Soro rato atl ene to evakat prdoiesobianed tvough an apemesten ‘Boor tat vss vance a ak mote, Iv. The Sarno rato dana on te same pines asthe Sharps reo, bt the Sarin rai epaces te kee fle wth ne minimum Bccepabe rood re standard devaton of reuens wth the sandad’ devaton of retrs bolw the ‘mam accept rtm wana oeee Question 72. Assuring Cher tings conan, bonds of equal natty wil il have dant OVO"'s pr USO 100 tace “alu, Which fhe flowing stlemntscorecy ranks he bonds aeorng or OVO per USO M0 ‘ce vain tom the ghost waive oe owest ate? a. Zero Coupon Bonds, Par Bonds, Prem Bonds rerum Bons, Par Bonds, Zara Caupan ons €. Pramum Bonde, Zao Coupon Bonds, Par Bons 4 Zee Coupen Bonde, Promum Bonds, Par Bonde. ‘Question 73, ‘The Dk pred is. 9 determinant of uty ik relcng te cost ct supply of rma” in 2 ‘manat Which of a towing ae ol vans cst To dese of sping meal)? arse cons ‘mean that the cos odes rae ase number of wansacson re Goran fa ime hoes) ‘Processing odor ow cots, 1 Great savesance cot coutepycredtworhiness © feniory cave con 1 Heegng coseSea trap vader, ana ha wants calc e ples send yl on 3 ck wis ooking a ite oer me-coutter ps f 25 year pl areal ooh Europea sv) ona same lock He has he totowna rita stock pce = USD 85 ‘Sri pon = USO 99 Cons ake ata» 5% ‘Unaoring sek ey = unknown {Cat pce = USD 10 Pango = USD 15 ati te contruous ped vient yd lat tock? 240% sae unto 75. ‘erecnuptn bond witha matty of 1 years Ratan annual eecive yl of 10%, Wha the coest ‘hunt mado’ Sason? sere ‘uestion 77 rm Ana aquty ostty of 0.2 and deo fem atu rato ett apantcaton) of 04. Fm 8 hes tho ume dott om valu abo but asst vlan 603. Whe stement about Fis A and Bs core 1 Thecapl of Fem As es han tha evrage of Fm 8 2 Thevoany of im As operatone reat han te olay of Fm 8s operations Me equity of Frm 8 tan ay han he ey of Pv ‘Me equ ot Frm Als tess hy han re eq of FB‘rm hs sued » angle zero-coupon bond that matures in years and has fce vale of 106, Aasime tat he vty of be tom aie == OS; tat ek eae = 008 an htt Sats 400 Using the ton mode wha se vale fhe bon?” ‘nto foloing tale, Nd) denotes me cumin detrauon functon fora star ora atbuon <_[a_] 2] ‘ooss | asco | tre | oaet © 3040 ‘che fotowing i ot allowed by he Base Accord fr measuring ee ik? 2 Banks may measure cre risk a standardized manner sugporied by enema! cede Banks may measure credit nk using 9 bank's teal cd rating eytome, subject © ‘he expe approval of ha bane superar «Using enone vangs for coin sacl and intra rains for he remaining asset {Blanks may moesute erst te uning that wn tana estraes oe reba of tons ‘iver deful,e exposra at deat. ana eacare matty, eae ‘aan minum conto. escosureruremants Sed suparvaor approval uection 90 ‘Yot'are gen the flowing oration stout European cl ton Time to mana = 2 yoars 1 Contnuou ik-ee ate 4% 1 Conmoous dena yell = 1 2 Na oe Cale eto option a 08Sigpose te strdard vation of normal popuaon known 5 be 10 andthe mean is hypatheicad tobe’ Suppose asamp sano 100 cree iat she range of saps means ho alow the ‘ype tobe accepted as evel sic of 0.057 ‘tween 1160 and 27.60 Berner 6388 ana 9 a5 ‘Botner 45 ana 2435 fata ote stock ice Sig ‘nate sock rm atime meal. Sa accord your mda S284 013at + 028Vat6) ‘Question 9. organi ie sirulaon, you ganerate 2 pam of he sock pce by staring at = 0, goneraing 9 ‘gio fr upiaing the sek pee seco Io the model. eemaning "by 1 nd repeating ‘hie [wosees then othe hoon reaches lnc cine olowne sales for generaing 2 sample fr El mplament hs siulaton Popa? |» Generate » sample ‘er © by ung be Inverse ofthe slandad normacumatve ‘astoutn of samp vaue dawn fom 9 unr dstiton betwee 9 ons » Genera 9 same fo € by samgng fom home! aseBaon wih mean 013 an ‘Sorc cain 0.25 © Gemrate 2 sample for € by wang fe iver of the standard norma cumulative ‘dsuiouton of a sample vate drawn fom a unferm dstbuton between aT. Use ‘aes congo aril tg wi fe some fame revs 4. Generate 9 sample for € by samgng om a noma! dition wih mean 013 and Standrd dean 025 Use Chabwahy decompostion corte tha sample wh tae Sime rom he pres neers‘ou have mpleranta the simuaton proces decussod above using a tine neva {7 aang the flowing sock pice pth yenetatod by your mplmanatn 003, a yo = ell. So ceed eeicatnn aed ea a = sie = = & ven is samp, wich of te flbwing sirdabon steps mest Waly contains an ar? | Cakelaon to update the sock price © Generation offendom sample vat fr Stata te age spre St ach prsQuestion ha inde choce exam with four choices foreach of she quesons, whats the pecbabity tat 8 ‘deat ges tower an two questons comet sing by guessing? nore 3 Question 5 “Jatore baa nendewed fr the poston of CRO for a ange Rind und. You are asked to common Sine rk management approach ote CRO you woul replace, Joes Sm, who fst et sat ‘Sen unto Rnd To evsuate the Hak of a Redpe fund at vest n US equte over te Com i t i ' i i “rons lite nd to he fo hers and standard deviton of he resale he represen. he cas en terest he ala ofthe find and usa the parame approach assuring soma “bolo rears estate he one mor i I | 3 ‘teres! denston 1 Tho eats tthe exposures 0 the Fisk tacos wi en be biased since the {tun of mary hedge unde exhib high sera alton compared io he ets ot ‘musi tds 1. Thema! ted by Sam ae nw elena pombe hap ngs change eponures 0 he utes oon, bu the expla pomer ele terinprorod by wang adahonal ane ae tr ht hve Doon Govlopad se 1v. Sin potato nokings fort tpl nadye lund change so much is hopeless 0 ape expiam move anata acon of we feta 2 type! bese fad using vouSc ee sonny statement about Ararean opto is nce? ‘American options can be eri a ny Se utd matty ‘Amerson opts are snays wr atleast we much B3 Euepeonoptcns. ‘Amescan opson can ey ta ved wah Monte Caro smut ‘Nnedcan eptone en be vad ath Boma wees unation 7, ‘ich fe lowing i re about sos tasting? 12 1s used to evaluate the potent imgact 09 portoio values of unikay, thous sbi, events or moverents ae arc arabe » Ket tk remaeron ll ety cies oct ut tronad acu Son's and 0 above ave we oe None he above oe We Question #8, ‘You rave eared i a currency swap lo which you recave 4% par annum in yen and pay 6% per annum in dats eae a year. The picts nthe wo cree re 1000 min yor a 70 maton alas The swap wil at for arena wo yar, andthe cent exchange rains 145 yo for 1 lr ‘Trend pts (i carina Comping) are Gren fate bow What ee vk oma youn mon sla? Ye oan 250% nea Sates 475% 4270 our 13‘S'qutyeth ema Ratings Based (RB) appoach unter Base! banks need to i conan ‘hn seuremars: One of ese fe “Corporate Govermance ana Overs” Under tha, erat Mok ‘Gor! son nga component Which of te flowing I ton arb of espnsomty oa ere Mk 2 Tesing and monitoring eternal ade, 3 Delerening procedures to ety tat aing defrtons ae consent apped across ‘partment a geoarape aoa .& Reowng aad documenting ary changes othe rating process, nctng he roasons for necnange 4 Ghynton 0 vareus pes of ct exposies greene appa x he Found aw om Seser ne 3 nal Rasngs Based appo8E unt Base, ‘en ote lowing matoos ued fr acing ect ls ven elk LGD" whee + GO" the eflectve os gran deta consianng tak mitgaton mania) 2 Lepiautatine senor unsecured arposure blorarecognton of catetral (45%) 1 ite curen wo ote exposure coh en fsa ont poss) 1 ete ceposuevabie ator rex mipaton ‘9 Loo" = L60 «(€"/) 8 eo = Leo ete: Fe) © USO = LGD te" rE) 4 too topae 6) Question a. ‘To den itd ofan ansat 10% per annum. Ya the deta ofa long ears contact an ibe [stent oon tomate? 41 Chrno detarine whut ana noomaionunetion 2, “nh allowing efooaton on to Bond tues, what the marginal mortality ate foreach bad in te second year? Beganng ot | Cubtanting Vato ‘sianang Vane ‘ven Bong A one 1 | W805. maar {U8 5 500 milion z 7 7 7 USO 7550 fon USO ETE mr For bond A, the magia! morally rte the Wt yar 5.00% For bond, te magia ory rate the Wt yor 83.00%, 1. MIR bond A= 7.0%: MIR bon he nA = 42 3 MR bo ©. MMR Bond A= 17 MU bond B= {MMR bond A= 7 Mond B= veation 9, You ar analyzing wo comparable (sae creat ang, matty, bqy, ae) US callable corporate ‘banat The flowing dats Is avalabe for he oma tread over Re US Trensury yok! cuve ane 2 ‘Spread and opow-aqusied spread (OAS) alate fo ha US Treasury spot cuve == x ¥ Romeal spread | vas | 790] 2 speed 3 Te ‘OAS: 10 105 ‘Tee noma spreac on te comparable optontee bonds ne marke i 100 basis pons. Assuming ‘hat er no mode rk wih your OAS mode, which lth lowing satan = corec™ 1 Xone undonstia Yon sundevaues © Kandy Som ae underaves 4 Nother ner undenalesuvation 94, ‘One ote requrement outing tetera! Rais Based approach unde aso! su tagraten ot ‘he itmal moc! mo ho vera management iormaton stoma ofthe ineiuon and the ‘management ofthe baring book eauly porto Which of he Iolowng bes doscrbes hs eguremant® . ‘Questions. Estbisting investment hu rales ad evluating ternative investments Heasuneg and asessing eq portale. petomence, (ncn the tak autos froma ‘Aoentng enone capa aquy hangs and evahang overt capt adaquocy ot feqroa under Par 2 ‘Reteo bss on maka riven struments uch 25 swaps ana owas anes Question 96. Mant ates move you favor Nata move agar You Narketrate move aga ou and the counterparty deta Manet ales move noua a he counterparty Seat hich te fofowing statment nt comet? ‘The more tho fm hedges is ancl exposures, theless equty requ osupoot is eae, Inert macoie valu, a fm must nedge ts tani! exposure irespecve Of Hs apt sctre The ae of tok management 6 resice franca exposures fectvey increases Kes Becatone a hadgs franc exposures shoul be made joy wih te company’s capt focre dacs