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 RSK MGMT
 MODULE II : KEY RISKS AND THEIR MEASUREMENT - MARKET RISK
 Chapter 2: Quiz

Started on Wednesday, 16 August 2023, 9:15 PM

State Finished

Completed on Wednesday, 16 August 2023, 9:15 PM

Time taken 12 secs

Question 1
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For bonds without embedded options, the convexity adjustment
Select one:
a. Increases capital gains when interest rates decline.
b. Reduces capital losses when rates rise.
c. All the given options.
d. Is higher for longer-tenor securities.
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The correct answer is: All the given options.

Question 2
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The duration of a default-risk free floating rate bond is
Select one:
a. More than its time-to-reset.
b. Equal to its time-to-reset.
c. Not related to its time-to-reset.
d. Less than its time-to-reset.
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The correct answer is: Equal to its time-to-reset.

Question 3
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Duration of a fixed-rate coupon paying bond is
Select one:
a. More than its time-to-maturity.
b. Not related to its time-to-maturity.
c. Equal to its time-to-maturity.
d. Less than its time-to-maturity.
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The correct answer is: Less than its time-to-maturity.

Question 4
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Market risk capital charges under SMM ignore
Select one:
a. Difference in general market losses for more volatile currencies.
b. Non-linear impact of interest rate shocks.
c. Diversification benefits within and across asset classes.
d. All the given options.
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The correct answer is: All the given options.

Question 5
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Modified duration of a bond portfolio is the
Select one:
a. Not related to the modified durations of the bonds in the portfolio.
b. Simple average of the modified durations of the bonds in the portfolio.
c. Weighted average of the modified durations of the bonds in the portfolio.
d. Sum total of the modified durations of the bonds in the portfolio.
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The correct answer is: Weighted average of the modified durations of the bonds in the portfolio.

Question 6
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PV01 captures the impact of
Select one:
a. 1000 basis point change in rates.
b. 10 basis point change in rates.
c. 100 basis point change in rates.
d. 1 basis point change in interest rates.
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The correct answer is: 1 basis point change in interest rates.

Question 7
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Market Risk capital charges under SMM imply that
Select one:
a. Portfolio loss is not related to sum of losses on individual positions
b. Portfolio loss is more than sum of losses on individual positions
c. Portfolio loss is equal to sum of losses on individual positions
d. Portfolio loss is less than sum of losses on individual positions
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The correct answer is: Portfolio loss is equal to sum of losses on individual positions

Question 8
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Duration, Modified duration and convexity capture the impact of
Select one:
a. A fall in short-term and rise in long-term rates.
b. Parallel shifts of the yield curve.
c. A fall in long-term and rise in short-term rates.
d. Unequal changes in interest rates between long and short positions.
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The correct answer is: Parallel shifts of the yield curve.

Question 9
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The general market risk capital charges under the SMM assume that
Select one:
a. Shocks to less volatile equity positions are lower.
b. Shocks to all equity positions are the same.
c. Shocks to more volatile equity positions are higher.
d. Shocks to more volatile equity positions are lower.
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The correct answer is: Shocks to all equity positions are the same.

Question 10
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The standardized approach to capital charges (SMM) does not consider at all
Select one:
a. Yield curve and basis risks.
b. Impact of maturity reduction on bond price volatility.
c. Market Value of positions.
d. Impact of convexity on bond prices.
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The correct answer is: Impact of convexity on bond prices.