<<1234567891011121314151617181920>> 1. What does Basis Point Value (BPV) measure?Change in value due to 1 basis point change in the market yieldTotal market value of a portfolioRisk associated with market liquidityVariations in market value arising from uncertainties in the economyQuestion 1 of 20 2. How is BPV calculated?As the total market value of a portfolioAs the change in market value due to unit change in the variableAs the change in market value due to 1 basis point change in the market yieldAs the risk associated with market liquidityQuestion 2 of 20 3. What does a higher BPV indicate?Lower risk associated with the bondHigher risk associated with the bondHigher market liquidityLower market volatilityQuestion 3 of 20 4. How does BPV help in calculating profit or loss?By determining the market price of a bondBy measuring the sensitivity of market value to changes in yieldBy providing an objective measure of market riskBy quantifying the profit or loss for a given change in yieldQuestion 4 of 20 5. What does Macaulay's Duration represent?The total cash flow received over the bond's maturity periodThe sensitivity of the bond's price to yield changesThe average time it takes to receive the present value of the bond's cash flowsThe change in bond price for a given yield changeQuestion 5 of 20 6. What does Modified Duration measure?The sensitivity of bond price to changes in interest ratesThe total cash flow received over the bond's maturity periodThe average time it takes to receive the present value of the bond's cash flowsThe change in bond price for a given yield changeQuestion 6 of 20 7. What does a longer duration signify?Lower price sensitivity to yield changesHigher risk associated with the bondLower risk associated with the bondNo impact on bond priceQuestion 7 of 20 8. What is Value at Risk (VaR)?The maximum loss a bank can suffer in abnormal trading conditionsThe minimum loss expected in abnormal trading conditionsThe predicted worst-case loss at a specific confidence level over a certain period of time under normal trading conditionsThe potential loss in abnormal situationsQuestion 8 of 20 9. How is VaR calculated?By estimating potential losses in abnormal trading conditionsBy considering yield volatility and price volatilityBy using the variance/covariance matrix method onlyBy predicting the worst-case loss with a certain confidence level and time horizonQuestion 9 of 20 10. Which of the following is not a limitation of Value at Risk (VaR)?It does not measure losses under any particular market conditionsIt does not provide a worst-case scenarioIt is not sufficient for risk measurement on its ownIt accurately predicts potential losses under extreme market conditionsQuestion 10 of 20 11. Which statement best describes the usefulness of VaR?It accurately predicts potential losses in extreme market conditionsIt provides a worst-case scenario for risk measurementIt translates portfolio exposures into potential impact on Profit and LossIt measures losses under specific market conditionsQuestion 11 of 20 12. What is the primary purpose of back testing?To develop new risk modelsTo compare model-based VaR with actual portfolio performanceTo assess the accuracy of existing modelsTo predict future market movementsQuestion 12 of 20 13. When should banks generally conduct back testing of risk models?AnnuallyMonthly or quarterlyOnce every five yearsOnly when a new model is developedQuestion 13 of 20 14. What is the main objective of stress testing?To predict day-to-day market movementsTo determine possible changes in portfolio value due to non-normal market movementsTo identify profitable investment opportunitiesTo compare different risk modelsQuestion 14 of 20 15. Which stress testing technique involves identifying market parameters to stress, determining the quantum of stress, and applying it to the portfolio?Simple Sensitivity TestScenario AnalysisMaximum LossExtreme Value TheoryQuestion 15 of 20 16. What is the primary objective of risk monitoring and control?Implementing business policies onlyEnsuring the highest possible returnsSetting market risk limits and controlling variations in portfolio valueMaximizing market riskQuestion 16 of 20 17. What is one of the uses of models in risk measurement?Reporting risk positions to competent authoritiesEstimating portfolio risk under normal and stressed situationsSetting policy guidelinesAllocating resourcesQuestion 17 of 20 18. How does risk mitigation affect profit potential?It increases profit potentialIt has no impact on profit potentialIt reduces profit potentialIt stabilizes profit potentialQuestion 18 of 20 19. How can portfolio duration be reduced using sensitivity measures?By adding higher duration instrumentsBy selling higher duration instrumentsBy adding low duration instrumentsBy increasing sensitivity to market changesQuestion 19 of 20 20. How does a portfolio with two financial instruments having negative correlation reduce risk?Both instruments move in the same directionBoth instruments move in opposite directionsBoth instruments experience high volatilityBoth instruments experience low volatilityQuestion 20 of 20 Loading...
