<<123456789101112131415>> 1. What is Gap or mismatch risk?A gap or mismatch risk arises from holding assets and liabilities with different principal amounts, maturity dates or repricing dates, thereby creating exposure to changes in the level of interest ratesA gap between rate of interest paid on deposits and rate of interest charged on loansIt is gap between regulator stipulated pricing for deposits and advances and actual rates appliedIt is gap between total outstanding advances and total deposits that results in riskQuestion 1 of 15 2. What is basis risk?The risk that arises when interest rates move without any rationaleThe risk that the interest rate of different assets and liabilities may change in different magnitudesThe residual risk that still remains when the risk is already hedgedIt is a type of risk that can never be quantified or managedQuestion 2 of 15 3. What is embedded option risk?The risk that one faces when the risk is covered using an optionThe risk of interest sensitive deposits being more than interest sensitive assetsThe risk of premature withdrawal of deposits and prepayment of advancesThe risk of falling valuations of bonds when interest rates riseQuestion 3 of 15 4. What is the crucial assumption in bond pricing formula?Bond pricing is always dependent on financial strength of buyerBond pricing can be manipulated to suit the convenience of the sellerBond prices rise when interest rates riseAll coupon payments are reinvested at the bond's Yield to Maturity (YTM).Question 4 of 15 5. Which of the following is NOT a type of interest rate risk mentioned in the passage?Gap or Mismatch RiskCredit RiskReinvestment RiskYield Curve RiskQuestion 5 of 15 6. What are some of the interest rate risk measurement techniques discussed in the passage?Credit ratings and credit default swapsRepricing schedules and gap analysisDuration and credit default spreadsFinancial ratios and trend analysisQuestion 6 of 15 7. What is one of the options available to banks for managing interest rate?Selling non-performing assets (NPAs)Increasing long-term lendingReducing short-term borrowingsReducing long-term depositsQuestion 7 of 15 8. What are the four basic elements involved in sound interest rate risk management?Liquidity, solvency, profitability, and efficiencyManagement Oversight, policies & procedures, risk measurement, and internal controlsCredit risk, market risk, operational risk, and compliance riskAsset management, liability management, risk measurement, and capital managementQuestion 8 of 15 9. When did the Basel Committee on Banking Supervision (BCBS) finalize its standards on Interest Rate Risk in Banking Book (IRRBB)?April 2016April 2018February 2017April 2019Question 9 of 15 10. What is the target implementation year set by the Basel Committee for the standards on IRRBB?2016201720182019Question 10 of 15 11. Why did the Basel Committee finalize standards on IRRBB?To decrease transparency in banking operationsTo increase inconsistency among global banksTo promote global consistency, transparency, and comparability of IRBBTo discourage banks from computing IRRBBQuestion 11 of 15 12. When are banks required to implement the guidelines on IRRBB circulated by RBI?April 2016April 2018April 2019February 2017Question 12 of 15 13. What does governance of IRRBB involve according to the enhanced guidelines?Setting profit targets for IRRBBRegular monitoring of IRRBB exposureIncreasing risk appetite for IRRBBImplementing new products and activities without approvalQuestion 13 of 15 14. What should banks continue to follow for computing IRR according to the enhanced guidelines?Basel Committee standardsInternal Capital Adequacy Assessment Process (ICAAP)Historical economic dataMarket interest rate forecastsQuestion 14 of 15 15. What is the purpose of computing IRRBB separately according to the enhanced guidelines?To simplify risk management processesTo increase overall risk exposureTo assess impact on economic value and earnings separatelyTo avoid compliance with regulatory standardsQuestion 15 of 15 Loading...
