6 - Current Issues in Financial Markets

Question 1

Explain the distinctions between the two broad categories of machine learning and describe the techniques used within each category.

Answer 1

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Question 2

Analyze and discuss the application of AI and machine learning techniques in the following areas:

• Credit risk
• Market risk
• Operational risk
• Regulatory compliance

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Question 3

Describe the role and potential benefits of AI and machine learning techniques in risk management.

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Question 4

Identify and describe the limitations and challenges of using AI and machine learning techniques in risk management.

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Question 5

Identify and discuss the categories of potential risks associated with the use of AI by financial firms and describe the risks that are considered under each category.

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Question 6

Describe the four core components of AI governance and recommended practices related to each.

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Question 7

Explain how issues related to interpretability and discrimination can arise from the use of AI by financial firms.

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Question 8

Describe practices financial firms can adopt to mitigate AI risks.

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Question 9

Define cyber risk and describe the elements that constitute it.

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Question 10

Describe and compare causes of cyber risks and methods of enacting cyber attacks.

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Question 11

Identify and explain the effect COVID-19 has had on the level of cyber threat.

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Question 12

Assess how the financial sector in particular has been threatened by cyber risk during the pandemic.

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Question 13

Identify changes in cyber risk landscape and ways to mitigate risks to financial stability

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Question 14

Identify the key market developments that took place during the March 2020 COVID-19 market turmoil, conditions that were prevalent, and their effects on the financial markets and its participants.

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Question 15

Describe how financial participants sought safety and the stages by which stress spread through the financial system as the pandemic unfolded.

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Question 16

Describe the origins and backdrop of the March 2020 COVID-19 market stress and the systemic weaknesses existing prior to the pandemic that contributed to systemic fragility.

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Question 17

Describe the role that non-bank financial institutions’ (NBFIs) reliance on U.S. dollar funding, and the demand for liquidity and credit risk held outside the banking sector had on the resilience of the global financial system during the pandemic.

Answer 17

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Question 18

Describe the impact of the pandemic and its propagation on the financial markets, including money market funds (MMFs), CCPs, margin, open-ended funds, ETFs, short-term funding markets, repos, and the government and corporate bond markets.

Answer 18

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Question 19

Describe the public sector policy responses to restore financial market functioning during the COVID-19 market turmoil.

Answer 19

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Question 20

Describe the lessons learned from the March 2020 COVID-19 market turmoil.

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Question 21

Discuss regulatory expectations on LIBOR transition and how these expectations can help market participants in their management of conduct risk arising from the transition.

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Question 22

Analyze the risks of LIBOR transition from both sell-side and buy-side perspectives and give examples of good practice observations.

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Question 23

Describe the features comprising an ideal benchmark.

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Question 24

Examine the issues that led to the replacement of LIBOR as the reference rate.

Answer 24

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Question 25

Examine the risks inherent in basing risk-free rates (RFRs) on transactions in the repo market.

Answer 25

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Question 26

Describe climate-related risk drivers and explain how those drivers give rise to different types of risks for banks.

Answer 26

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Question 27

Compare physical and transition risk drivers related to climate change.

Answer 27

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Question 28

Assess the potential impact of different microeconomic and macroeconomic drivers of climate risk.

Answer 28

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Question 29

Describe and assess factors that can amplify the impact of climate-related risks on banks as well as potential mitigants for these risks.

Answer 29

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Question 30

Describe and compare different attributes of means of payment.

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Question 31

Describe the risks faced by the banking sector as e-money adoption increases and identify means of mitigating those risks.

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Question 32

Explain reasons for and characteristics contributing to rapid global adoption of e-money.

Answer 32

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Question 33

Evaluate effects of different scenarios of e-money adoption on the banking sector.

Answer 33

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Question 34

Discuss regulatory and policy actions that could be implemented in response to risks arising from increased adoption of e-money.

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