Under Basel rules, expected credit loss is a function of which of the following sets of parameters:

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Under Basel rules, expected credit loss is a function of which of the following sets of parameters:
A. 1 minus recovery rate, probability of default and exposure at default
B. exposure at origination, exposure at default and loss given default
C. loss given default, 1 minus recovery rate and exposure at default
D. exposure at origination, recovery rates and probability of default

Answer : B


What does the Model Code recommend regarding “entertainment and gifts”?
A. Management should monitor the form, frequency and cost of entertainment and gifts dealers receive, have a clearly articulated policy towards the giving/receipt of gifts and ensure the policy is enforced.
B. As gifts and entertainment may be offered in the normal course of business, employees can offer inducements to conduct business and solicit them from the personnel of other institutions.
C. Although management should not monitor the form, frequency or cost of entertainment/gifts dealers receive, they may have a policy towards the giving/receipt of gifts and ensure the policy is enforced.
D. Gifts or entertainment should never be offered in the normal course of business, and employees must never offer any inducements to conduct business, nor solicit them from other institutions.

Answer : C



How would you delta hedge an ‘at-the-money’ long call option?
A. Go short of the underlying commodity equal to 50% of the size of the option contract
B. Go long of the underlying commodity equal to 50% of the size of the option contract
C. Go long of the underlying commodity equal to the full size of the option contract
D. Go short of the underlying commodity equal to the full size of the option contract

Answer : A



What is interest rate immunization in the context of bank gap management?
A. the strategy of holding more interest rate sensitive assets than interest rate sensitive liabilities
B. the strategy of holding fewer interest rate sensitive assets than interest rate sensitive liabilities
C. reducing the size of the balance sheet
D. structuring a banks portfolio so that its net interest revenue and/or the market value of its portfolio will not be adversely affected by changes in interest rates

Answer : C



3-month EUR/USD FX swaps are quoted to you at 8/12. If the points are in your favor, what have you done?
A. Bought and sold 3-month EUR/USD through the swap
B. Sold and bought 3-month EUR/USD through the swap
C. Made the quote
D. Cannot say


Answer : A