Module 7 - Risk Management

Question 1

ISO3100 defines risk as effect of uncertainty on ____.

Answer 1

Objectives

Question 2

This is the risk treatment that you can take only if you are confidence in your ability, expertise and willingness to tolerate and manage the residual risk arising from the business opportunity that generates the specific risk.

Answer 2

Increase Risk

Question 3

These are risks that an organization is aware of but the full extent and implications are not completely clear

Answer 3

Developing Risks

Question 4

Which of the following statements is true?

a. Pre-settlement risk is present if your counterparty fails before settlement date and the trade has a negative value to you.
b. Pre-settlement risk is present if your counterparty fails before settlement date and the trade has a positive value to you.
c. Settlement risk is present when you settle via delivery versus payment.
d. None of the above

Answer 4

Pre-settlement risk is present if your counterparty fails before settlement date and the trade has a positive value to you.

Question 5

This is defined as the amount of loss that will be incurred if a borrower defaults

Answer 5

Loss Given Default

Question 6

The following are potential risk sources of market risk for Philippine corporations except:

a. Floating rate loans
b. USD requirements that need to be bought from banks
c. Bonds bought as investments
d. PHP cash received as payment from customers

Answer 6

PHP cash received as payment from customers

Question 7

This is defined as the aggregate level and types of risk an organization is willing to assume within its risk capacity to achieve its strategic objectives and business plan

Answer 7

Risk Appetite

Question 8

Below are description of a positively gapped position except?
a. Assets mature earlier than liabilities.

b. Positive cashflow precedes negative cashflow.
c. A declining interest rate environment would be beneficial for you.
d. A rising interest rate environment would be beneficial for you.

Answer 8

A declining interest rate environment would be beneficial for you.

Question 9

The following are inputs to the computation of Value at Risk (VAR) except?
a. Open Notional Position

b. Outlier Data
c. Defeasance period
d. Correlation

Answer 9

Outlier Data

Question 10

The following are factors affecting probability of default except:

a. Financial standing and condition of the borrower
b. State of the economy
c. Quality of Collateral
d. Developments in the borrower’s industry

Answer 10

Quality of Collateral