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ĐỀ 1
Question 1: You have the following information:

Stock A Stock B

Expected Return 0,10 0,25

Standard Deviation 0,2 0,4

Correlation 0,3

a. Determine the expected return of a portfolio with the following weights: 0.40 in stock A and 0.60

in stock B

b. Determine the standard deviation of the same portfolio

c. If the correlation between stocks A and B is -0.6, what will be the risk of the same portfolio.

Question 2: You are the risk manager of a fund. You are using the historical method to estimate VaR. You

find that the worst 10 daily returns for the fund over the period of last 100 trading days are -1.0%, -0.3%,

-0.6%, -0.2%, -2.7%, -1.0%, -2.9%, 0.1%, -1.1%, -3.0%.

What is the daily VaR for the portfolio at the 99% confidence level ?

Question 3: By using the following one-year transition matrix:

From/To AAA AA A BBB BB B CCC/C D Non

rated
AAA 87.44 7.37 0.46 0.09 0.06 0.00 0.00 0.00 4.59
AA 0.6 86.65 7.78 0.58 0.06 0.11 0.02 0.01 4.21
A 0.05 2.05 86.96 5.50 0.43 0.16 0.03 0.04 4.79
BBB 0.02 0.21 3.85 84.13 4.39 0.77 0.19 0.29 6.14
BB 0.04 0.08 0.33 5.27 75.73 7.36 0.94 1.20 9.06
B 0.00 0.07 0.20 0.28 5.21 72.95 4.23 5.71 11.36
CCC/C 0.08 0.00 0.31 0.39 1.31 9.74 46.83 28.83 12.52

Determine the chance a BBB loan can be downgraded until CCC/C over 1 year.

Question 4: Suppose that bank A end this year with this following implied balance sheet:

(Unit: million dollar)

Assets Liabilities

Loans 900 Deposits 1000

Gov Securities 75 Equity 75

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 lOMoARcPSD|10833720

Corporate Bonds 100

Suppose that the rate of return on the loan portfolio is 9%, the Economic Capital (EC) ratios against loans

and securities are 7.5% and 3.5% respectively; EC can be invested at 6.5% interest rate; cost to pay for the

deposit is 6%; expected loss for loan portfolio and securities is 1% and 1.5% respectively; operating cost

is 15.

Calculate bank A’s RAROC.

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 lOMoARcPSD|10833720

ĐỀ 2

Question 1: You have the following information:

Return
Scenario Probability Stock A Stock B
1 0,1 -20% -5%
2 0,25 20% 0%
3 0,3 15% 10%
4 0,25 10% 20%
5 0,1 35% 15%
a. Calculate the expected return of each stock.
b. Calculate the standard deviation of each stock.
c. Calculate the expected return and the standard deviation of a portfolio composed of 25% stock A
and 75% stock B.

Question 2: Sam Neil, a new quantitative analyst, has been asked by the portfolio manager to calculate the
portfolio 1-day 98% Value-at-Risk (VaR) measure based on the past 100 trading days. What will this be if
worst 5 losses in the past 100 trading days are 316M, 385M, 412M, 422M and 485M in USD?

Question 3: By using the following one-year transition matrix:

From/To AAA AA A BBB BB B CCC/C D Non

rated
AAA 87.44 7.37 0.46 0.09 0.06 0.00 0.00 0.00 4.59
AA 0.6 86.65 7.78 0.58 0.06 0.11 0.02 0.01 4.21
A 0.05 2.05 86.96 5.50 0.43 0.16 0.03 0.04 4.79
BBB 0.02 0.21 3.85 84.13 4.39 0.77 0.19 0.29 6.14
BB 0.04 0.08 0.33 5.27 75.73 7.36 0.94 1.20 9.06
B 0.00 0.07 0.20 0.28 5.21 72.95 4.23 5.71 11.36
CCC/C 0.08 0.00 0.31 0.39 1.31 9.74 46.83 28.83 12.52

Determine the chance an A loan can be downgraded until B over 1 year.

Question 4:

Two enterprise A and B both want to borrow 10 million euros for 5 years. A is suitable for fixed-rate loan

while B is for floating-rate loan. Interest rates on loans to these 2 enterprises are shown in the table below:

Fixed rate Floating rate

A 10% LIBOR + 0,3%

B 11,2% LIBOR + 1%

Interpret the swap lines between A and B, with a financial intermediary in the middle charging a fee of 10

bps.

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ĐỀ 3

Question 1: An investor with capital of $150,000 wants to build a portfolio M consist of stocks A and B. It

has the following information:

Possible scenarios Probability Return of stock A Return of stock B

Strong expansion 30% 20% 40%

Medium expansion 10% 8% 12%

Stable 20% 0% 4%

Strong recession 40% -10% -24%

Calculate, in each of the following cases, the expected return and the risk of the portfolio M.

Case 1: The investor places $90,000 in stock A and $60,000 in stock B.

Case 2: The investor borrows $60,000 from his broker at a rate of 10% and places $210,000 in stock B.

Question 2: You are the risk manager of a fund. You are using the historical method to estimate VaR. You

find that the worst 10 daily returns for the fund over the period of last 100 trading days are -1.0%, -0.3%,

-0.6%, -0.2%, -2.7%, -1.0%, -2.9%, 0.1%, -1.1%, -3.0%.

What is the daily VaR for the portfolio at the 95% confidence level ?

Question 3: By using the following one-year transition matrix:

From/To AAA AA A BBB BB B CCC/C D Non

rated
AAA 87.44 7.37 0.46 0.09 0.06 0.00 0.00 0.00 4.59
AA 0.6 86.65 7.78 0.58 0.06 0.11 0.02 0.01 4.21
A 0.05 2.05 86.96 5.50 0.43 0.16 0.03 0.04 4.79
BBB 0.02 0.21 3.85 84.13 4.39 0.77 0.19 0.29 6.14
BB 0.04 0.08 0.33 5.27 75.73 7.36 0.94 1.20 9.06
B 0.00 0.07 0.20 0.28 5.21 72.95 4.23 5.71 11.36
CCC/C 0.08 0.00 0.31 0.39 1.31 9.74 46.83 28.83 12.52

Determine the chance a BBB loan can be upgraded over 1 year.

Question 4: Suppose that bank A end this year with this following implied balance sheet:

(Unit: million dollar)

Assets Liabilities

Loans 900 Deposits 1000

Gov Securities 75 Equity 75

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 lOMoARcPSD|10833720

Corporate Bonds 100

Suppose that the rate of return on the loan portfolio is 9%, the Economic Capital (EC) ratios against loans

and securities are 7.5% and 3.5% respectively; EC can be invested at 6.5% interest rate; cost to pay for the

deposit is 6%; expected loss for loan portfolio and securities is 1% and 1.5% respectively; operating cost

is 15.

Calculate bank A’s RAROC.

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 lOMoARcPSD|10833720

ĐỀ 4
Question 1: You have the following information:

Stock A Stock B

Expected Return 0,10 0,25

Standard Deviation 0,2 0,4

Correlation 0,3

a. Determine the expected return of a portfolio with the following weights: 0.40 in stock A and 0.60

in stock B

b. Determine the standard deviation of the same portfolio

c. If the correlation between stocks A and B is -0.6, what will be the risk of the same portfolio.

Question 2: Jerome Kerviel, a new quantitative analyst, has been asked by the portfolio manager to
calculate the portfolio 1-day 99 % Value-at-Risk (VaR) measure based on the past 100 trading days. What
will this be if worst 5 losses in the past 100 trading days are 216M, 385M, 312M, 422M and 485M in
USD?

Question 3: By using the following one-year transition matrix:

From/To AAA AA A BBB BB B CCC/C D Non

rated
AAA 87.44 7.37 0.46 0.09 0.06 0.00 0.00 0.00 4.59
AA 0.6 86.65 7.78 0.58 0.06 0.11 0.02 0.01 4.21
A 0.05 2.05 86.96 5.50 0.43 0.16 0.03 0.04 4.79
BBB 0.02 0.21 3.85 84.13 4.39 0.77 0.19 0.29 6.14
BB 0.04 0.08 0.33 5.27 75.73 7.36 0.94 1.20 9.06
B 0.00 0.07 0.20 0.28 5.21 72.95 4.23 5.71 11.36
CCC/C 0.08 0.00 0.31 0.39 1.31 9.74 46.83 28.83 12.52

Determine the chance an A loan can be upgraded to AAA over 1 year.

Question 4: Two enterprise A and B both want to borrow 10 million euros for 5 years. A is suitable for

fixed-rate loan while B is for floating-rate loan. Interest rates on loans to these 2 enterprises are shown in

the table below:

Fixed rate Floating rate

A 10% LIBOR + 0,3%

B 11,2% LIBOR + 1%

Interpret the swap lines between A and B, with a financial intermediary in the middle charging a fee of 10

bps.

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 lOMoARcPSD|10833720

ĐỀ 5
Question 1: You have the following information:

Stock A Stock B

Expected Return 0,10 0,25

Standard Deviation 0,2 0,4

Correlation 0,3

d. Determine the expected return of a portfolio with the following weights: 0.40 in stock A and 0.60

in stock B

e. Determine the standard deviation of the same portfolio

f. If the correlation between stocks A and B is -0.6, what will be the risk of the same portfolio.

Question 2: You are the risk manager of a fund. You are using the historical method to estimate VaR. You

find that the worst 10 daily returns for the fund over the period of last 100 trading days are -1.0%, -0.3%,

-0.6%, -0.2%, -2.7%, -1.0%, -2.9%, 0.1%, -1.1%, -3.0%.

What is the daily VaR for the portfolio at the 98% confidence level ?

Question 3: By using the following one-year transition matrix:

From/To AAA AA A BBB BB B CCC/C D Non

rated
AAA 87.44 7.37 0.46 0.09 0.06 0.00 0.00 0.00 4.59
AA 0.6 86.65 7.78 0.58 0.06 0.11 0.02 0.01 4.21
A 0.05 2.05 86.96 5.50 0.43 0.16 0.03 0.04 4.79
BBB 0.02 0.21 3.85 84.13 4.39 0.77 0.19 0.29 6.14
BB 0.04 0.08 0.33 5.27 75.73 7.36 0.94 1.20 9.06
B 0.00 0.07 0.20 0.28 5.21 72.95 4.23 5.71 11.36
CCC/C 0.08 0.00 0.31 0.39 1.31 9.74 46.83 28.83 12.52

Determine the chance a BBB loan can be downgraded to BB over 1 year.

Question 4: Suppose that bank A end this year with this following implied balance sheet:

(Unit: million dollar)

Assets Liabilities

Loans 900 Deposits 1000

Gov Securities 75 Equity 75

Corporate Bonds 100

Downloaded by Duong Le (lthuyduong2003@gmail.com)

 lOMoARcPSD|10833720

Suppose that the rate of return on the loan portfolio is 9%, the Economic Capital (EC) ratios against loans

and securities are 7.5% and 3.5% respectively; EC can be invested at 6.5% interest rate; cost to pay for the

deposit is 6%; expected loss for loan portfolio and securities is 1% and 1.5% respectively; operating cost

is 15.

Calculate bank A’s RAROC.

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 lOMoARcPSD|10833720

ĐỀ 6

Question 1: You have the following information:

Return
Scenario Probability Stock A Stock B
1 0,1 -20% -5%
2 0,25 20% 0%
3 0,3 15% 10%
4 0,25 10% 20%
5 0,1 35% 15%
d. Calculate the expected return of each stock.
e. Calculate the standard deviation of each stock.
f. Calculate the expected return and the standard deviation of a portfolio composed of 25% stock A
and 75% stock B.

Question 2: Sam Neil, a new quantitative analyst, has been asked by the portfolio manager to calculate the
portfolio 1-day 98% Value-at-Risk (VaR) measure based on the past 100 trading days. What will this be if
worst 5 losses in the past 100 trading days are 316M, 385M, 412M, 422M and 485M in USD?

Question 3: By using the following one-year transition matrix:

From/To AAA AA A BBB BB B CCC/C D Non

rated
AAA 87.44 7.37 0.46 0.09 0.06 0.00 0.00 0.00 4.59
AA 0.6 86.65 7.78 0.58 0.06 0.11 0.02 0.01 4.21
A 0.05 2.05 86.96 5.50 0.43 0.16 0.03 0.04 4.79
BBB 0.02 0.21 3.85 84.13 4.39 0.77 0.19 0.29 6.14
BB 0.04 0.08 0.33 5.27 75.73 7.36 0.94 1.20 9.06
B 0.00 0.07 0.20 0.28 5.21 72.95 4.23 5.71 11.36
CCC/C 0.08 0.00 0.31 0.39 1.31 9.74 46.83 28.83 12.52

Determine the chance an A loan can be downgraded until B over 1 year.

Question 4:

Two enterprise A and B both want to borrow 10 million euros for 5 years. A is suitable for fixed-rate loan

while B is for floating-rate loan. Interest rates on loans to these 2 enterprises are shown in the table below:

Fixed rate Floating rate

A 10% LIBOR + 0,3%

B 11,2% LIBOR + 1%
Interpret the swap lines between A and B, with a financial intermediary in the middle charging a fee of 10
bps.

Downloaded by Duong Le (lthuyduong2003@gmail.com)