Risks

Question 1

Operational Risk

Answer 1

Faulty process

Human error

Question 2

Tail risk

Answer 2

“Downside risk”

Extreme events are more likely

Than the managers have assumed

Includes VaR

Question 3

Solvency risk

Answer 3

Run out of cash &

Unable to continuing operating

Question 4

Stress testing def.

Answer 4

Examines the effects of changes in a single input

Question 5

Scenario analysis test

Answer 5

effects of changes in MULTIPLE inputs at the same time

Question 6

Risk Shifting

Answer 6

Managing risk by modifying the distribution of outcomes

Question 7

Beta, std dev and Duration are:

Answer 7

Beta: market risk of a portfolio

Std dev: volatility of assets prices

Duration: price SENSITIVE of debt securities to change in rates

Question 8

VaR is the:

Answer 8

Minimum loss over a period

Will occur in a specific probability

Question 9

Conditional VaR

Answer 9

EXPECTED value of a loss

GIVEN the exceeded in loss minimum amount

Question 10

Absolute Risk objective express:

Answer 10

The maximum loss amount in value

with

an associated probability of loss

Question 11

Financials risks (3)

Answer 11

Credit
Liquidity
Market