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2016-FRR Questions Bank

Page: 15 / 28
Total 387 questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 57

In analyzing the historical performance of a financial product, you are concerned about "fat tails", the probability of extreme returns compared to realized returns. Which of the following measures should you use to determine if the product return distribution of the product has "fat tails"?

Options:

A.

Mean

B.

Standard deviation

C.

Skewness

D.

Kurtosis

Question 58

On January 1, 2010 the TED (treasury-euro dollar) spread was 0.9%, and on January 31, 2010 the TED spread is 0.4%. As a risk manager, how would you interpret this change?

Options:

A.

The decrease in the TED spread indicates a decrease in credit risk on interbank loans.

B.

The decrease in the TED spread indicates an increase in credit risk on interbank loans.

C.

Increase in interest rates on both interbank loans and T-bills.

D.

Increase in credit risk on T-bills.

Question 59

Which one of the following four statements presents a challenge of using external loss databases in the operational risk framework?

Options:

A.

Use of benchmarked data reflects similar data collection standards.

B.

External events are usually not of interest to senior management.

C.

If the external data is gathered from news sources, it may only reflect events that are interesting to the press.

D.

They provide a source of data on what operational loss events will occur.

Question 60

After one year and spending USD 1.0 million, a bank finally succeeds in recovering USD 10 million on an exposure that, at the time of its default, was valued at USD 20 million. If the recovery discount rate is 10%, what is the estimate of the recovery rate?

Options:

A.

31%

B.

36%

C.

41%

D.

46%

Page: 15 / 28
Total 387 questions