All Matches

Solution Library

Expert Answer

Textbooks

Search Textbook questions, tutors and Books

Oops, something went wrong!

Change your search query and then try again

Result Not Found

Books FREE
Tutors
Study Help
Hire a Tutor
AI Study Help New

Search
Sign In
Register

study help
business
risk management financial

Questions and Answers of Risk Management Financial

4. How much will your position cost during 1 year?
3. Display your position explicitly using precise futures contract data.
2. In particular, how are HIBOR, HSI, and HSI futures related to each other?
1. What is the rationale of your double-play strategy?
5. How do you plan to roll your position over? 6. Looking back, did Hong Kong drop the peg?
4. How much will your position cost during 1 year?
3. Display your position explicitly using precise futures contract data.
2. In particular, how are HIBOR, HSI, and HSI futures related to each other?
1. What is the rationale of your double-play strategy?
4. Hong Kong’s economy has entered a recession.
3. High interest rates cannot be tolerated by property developers (who incidentally are among Hong Kong’s biggest businesses) and by the financial institutions.
2. Hong Kong’s economy is based on the real estate industry.
1. The HK$ is overvalued by about 20% against the USD.
4. Consider the following instruments and the corresponding quotes. Rank these instruments in increasing order of their yields.Instrument Quote 30-day U.S. T-bill 5.5 30-day UK T-bill 5.4 30-day ECP
3. Today is March 1, 2004. The day-count basis is actual/365. You have the following contracts on your FX-book. CONTRACT A: On March 15, 2004, you will sell 1,000,000 EUR at a price F1 t dollars per
2. In this question we consider a gold miner’s hedging activities. (a) What is the natural position of a gold miner? Describe using payoff diagrams. (b) How would a gold miner hedge her position if
1. On March 3, 2000, the Financial Accounting Standards Board, a crucial player in financial engineering problems, published a series of important new proposals concerning the accounting of certain
3. Read the market example below and answer the following questions that relate to it. Proprietary dealers are betting that Euribor, the proposed continental European-based euro money market rate,
2. Suppose the following stock prices for GE and Honeywell were observed before any talk of merger between the two institutions: Honeywell (HON) 27.80 General Electric (GE) 53.98 Also, suppose you
1. Suppose the quoted swap rate is 5.06/5.10. Calculate the amount of fixed payments for a fixed payer swap for the currencies below in a 100 million swap. • USD. • EUR. Now calculate the amount
5. Show, using an “appropriate” formula, that the negative interest rates can be more than compensated by the extra points on the forward rates. (Use the decompositions given in the text.)
4. What do the Western banks gain if they do that?
3. What are nostro accounts? Why are they needed? Why are the Western banks not willing to hold the yens in their nostro accounts?
2. How does this behavior of Japanese banks affect the balance sheet of the Western counterparties?
1. Show how Japanese banks were able to create the dollar-denominated loans synthetically using cash flow diagrams.
10. Investors seek access to the credit portfolio of a bank static synthetic CDO, and the credit trading expertise of portfolio managers, when considering to invest in static CDO or managed synthetic
9. The fully unfunded CDO uses only credit derivatives in its structure.
8. A fully funded CDO is a structure where the credit risk of the entire portfolio is transferred to the SPV via a credit default swap. In a fully funded synthetic CDO the issuer enters into the
7. A synthetic CDO is a completely unfunded structure which uses credit default swaps to transfer the entire credit risk of the reference assets to investors who are protection sellers. In a
6. Investors in the credit-linked notes expose themselves to the credit risk of the originator’s assets, which are referenced to the notes. If there are no credit events investor coupon on notes.
5. In the credit default swap arrangement, the risk transfer is undertaken in return for the swap premium, which is then paid to investors by the issuer.
4. For a generic CDO structure, the credit risk of the bank’s assets is transferred to the issuer, a special purpose vehicle, and then investors, by means of credit default swaps and an issue of
3. Transferring credit risk using synthetic CDOs enables banks to reduce their regulatory capital costs.
2. Synthetic CDOs are used by commercial banks to manage and transfer credit risk from their balance sheets without transferring assets themselves.
1. Credit derivatives such as credit default swaps are used in the construction of structured products known as synthetic collateralized debt obligations.
6. Introduce the concept of the managed synthetic CDO used by portfolio managers for credit arbitrage and trading purposes.
5. Illustrate how synthetic CDOs are structured.
4. Illustrate the advantages of the synthetic CDO structure to a bank using them for risk management purposes.
3. Demonstrate how banks can use synthetic CDOs to manage and transfer credit risk.
2. Describe how credit derivatives are used in the construction of structured products known as synthetic collateralized debt obligations (CDO).
1. Define credit risk transfer and regulatory capital relief as undertaken by commercial banks.
12. Pricing a credit default swap involves assessment of (1) the riskfree interest rate risk term structure, (2) the credit term structure, and (3) the recovery rate.
11. The Jarrow-Lando-Turnbull reduced form model focuses on modeling default probability and credit migration
10. Reduced form models are a form of no-arbitrage model. They are fitted to the term structure of risky bonds to generate no arbitrage prices for credit derivatives.
9. Structural models are characterized by modeling the firm’s value in order to provide the probability of a firm default. The Black-Scholes-Merton option pricing framework is the foundation of the
8. Issues to consider when carrying out credit derivative pricing include implementation and selection of appropriate modeling techniques, parameter estimation, quality and quantity of data to
7. Pricing models are defined as structural models or reduced-form models.
6. The effective use of pricing models requires an understanding of the model’s assumptions, the key pricing parameters, and an understanding of the limitations of a pricing model.
5. Pricing models make assumptions about the reference asset probability of default and default correlation, and credit rating migration.
4. Credit derivatives isolate and trade credit as their sole asset, thus trade at a different level than the asset swap on the same reference asset. This difference is known as the basis.
3. Credit derivatives pricing is based on the no-arbitrage principle.
2. The asset swap technique assumes that the asset swap spread on an issuer name is the price the market assigns to that name’s credit risk above Libor risk.
1. The market uses two generic approaches in pricing credit derivatives:the asset swap technique and the stochastic pricing model technique.
10. Illustrate the concept of the basis using observations from the market.
9. Explain the difference in spread levels between asset swap and credit default swap prices on the same reference name.
8. Compare cash and synthetic markets.
7. Compare the different price results obtained from different pricing models.
6. Demonstrate pricing for a credit default swap.
5. Explain the concept of credit spread modeling.
4. Describe the Jarrow-Lando-Turnbull model and the Duffie-Singleton model.
3. Introduce credit derivative pricing models, including structural models and reduced-form models.
2. Explain the asset swap pricing approach to credit derivative pricing.
1. Introduce the concept of “fair value” pricing of credit derivatives and the no-arbitrage principle behind fair value pricing.
19. There are risks associated with using credit derivatives, including counterparty risk.
18. The main applications of credit derivatives by fund managers are(1) enhancing portfolio return, (2) reducing credit exposure, and (3)entering into credit switches and zero-cost credit exposure
17. Credit derivatives are used for a number of applications including capital structure arbitrage and exposure to specific market sectors and corporate credit.
16. Banks transfer credit risk away from their balance sheet using credit derivatives, without removing risky assets from the balance sheet itself.
15. A credit-linked note is a bond issued at par, whose principal and/or interest is linked to the performance of a reference asset. The buyer of the note is the protection seller and the issuer is
14. A funded total return swap has been used in synthetic CDO structures.
13. A credit spread option in which the underlying is a credit spread has a payoff that is adjusted to eliminate interest rate risk.
12. The strike price for a credit spread option in which the underlying is a financial obligation with a fixed credit spread is determined at the exercise date by spread over a benchmarked reference
11. Credit spread options fall into two categories based on the underlying:(1) a financial obligation with a fixed credit spread or (2) a credit spread.
10. Credit default options have a payoff that is triggered by the occurrence of a credit event.
9. Credit options can be classified as credit default options and credit spread options.
8. A total return swap is an agreement between two parties to exchange the “total return” from a financial asset such as a bond or loan in return for a payment of Libor plus a spread. Total
7. A credit default swap is a bilateral contract in which a protection buyer pays a premium to a protection seller, in return for which the protection seller will pay the notional value to the buyer
6. The main credit derivatives are credit default swaps, total return swaps, and credit-linked notes.
5. Credit derivatives are cash settled or physically settled.
4. The advantages of credit derivatives include: (1) the issuer of the reference asset is not required to be a party to the credit transfer process;(2) the credit derivative can be tailor-made to
3. A credit event can include bankruptcy, restructuring, interest coverage default or credit rating downgrade.
2. Credit derivatives are governed by legal documentation describing their mechanics. A payout is triggered in the event of a pre-defined credit event.
1. Credit derivatives are instruments designed to manage credit risk and trade credit as an asset class in itself.
6. Present an overview of the main applications of credit derivatives for commercial banks and portfolio managers.
5. Describe the conditions under which banks and financial institutions use credit derivatives.
4. Define credit derivative mechanics, including the concept of credit event, physical settlement, and cash settlement.
3. Explain what credit default swaps, total return swaps, credit-linked notes, and credit options are.
2. Explain how credit risk can be managed and hedged using credit derivatives.
1. Explain and describe what credit derivatives are.
19. Forward-looking tracking error due to quality risk and due to nonsystematic risk (issuer-specific risk and issue-specific risk) can be used to estimate the exposure of a bond portfolio relative
18. Reasons for integrating the interest rate risk and credit risk functions include: (1) the need for comparability between returns on credit risk and interest rate risk, (2) the transactional
17. Applications of credit VaR include: prioritizing risk-reducing actions (including targeting largest absolute exposure, largest percentage level of risk and volatility, and largest absolute amount
16. CreditRisk+ uses the default and nondefault approach.
15. CreditMetrics uses the variance-covariance and portfolio approaches:it estimates portfolio VaR due to credit events (downgrades and defaults).
14. In quantifying credit risk there are two frameworks to adopt: (1)default and non-default and (2) the risk-adjusted return on capital approach.
13. The most commonly used measures of credit value-at-risk use a portfolio approach to risk measurement. The portfolio risk exposure is determined by: (1) size of exposure, (2) maturity of
12. Modeling credit risk takes into account the skewed distribution pattern of credit returns and credit loss patterns.
11. The default loss rate is defined as the product of the default rate and(100% – recovery rate).
10. An investor in high-yield corporate bonds must look at both the default rate and the recovery rate.
9. Focusing on default rates on high-yield corporate bonds does not provide sufficient insight into the risks of investing in this sector of the bond market.
8. For long-term debt obligations, a credit rating is a forward-looking assessment of the probability of default and the relative magnitude of the loss should a default occur. For short-term debt

Showing 100 - 200 of 2358

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Last

Services

Sitemap
Fun
Definitions
Become Tutor
Study Help Categories
Recent Questions
Expert Questions

Company Info

Security
Copyrights
Privacy Policy
Terms & Conditions
SolutionInn Fee
Scholarship

Get In Touch

About Us
Contact Us
Career
Jobs
FAQ
Campus Ambassador

Secure Payment

Download Our App

© 2024 SolutionInn. All Rights Reserved