FRM一級(jí)：
1.A distribution of asset returns that has a significantly higher probability of obtaining large losses is described as:
A. left skewed.
B. right skewed.
C. fat tailed.
D. symmetrical.
2.A bank has entered into a 3 x 6 forward rate agreement to receive a fixed rate of 3.35 percent on $12 million in six months. If the applicable rate in three months is 3.62 percent, the cash flow associated with this forward rate agreement for the bank would be closest to:
A. $16,200.
B. $32,400.
C. –$8,100.
D. –$32,400.
3.Which of the following would NOT be considered stress testing?
A. S&P 500 index drop of 1%.
B. Yield curve twist of 50 basis points.
C. Exchange rate depreciation of 10% between $US relative to Japanese Yen.
D. Treasury yield curve shift of 100 basis points.
FRM二級(jí)：
4.The most that the buyer of a credit default swap can expect to receive in the event of a default is:
A. Interest and principal payments originally scheduled.
B. The par value of the instrurnent.
C. A premium price for the instrurnent.
D. 85% of the originally scheduled payments.
5.A U.S. company has previously issued a dual currency bond that pays coupons in euros and principal in yen. A major subsidiary ofthe company is based in Germany and receives euro-denominated payments. The current price on the bond is 80 with a 20% probability of default. The anticipated recoverate is 60%. Which of the following statements is correct? Assume the interest rate is zero.
A. The company faces wrong-way risk; risk-neutralloss rate equals 8%.
B. The company faces wrong-way risk; risk-neutralloss rate equals 20%.
C. The company faces right-way risk; risk-neutral loss rate equals 8%.
D. The company faces right-way risk; risk-neutral loss rate equals 20%.
6.A reverse knock-out option is more difficult to hedge than a standard option because the:
A. Market in such options is very illiquid.
B. Value changes dramatical1y at the barrier point.
c. Black-Scholes model does not apply to pricing such options.
D. Gamma of the option continually varies throughout the range of relevant strikes.
Answer:
1.A
A distribution is left skewed when the distribution is asymmetrical and there is a higher probability of large negative returns than there is for large positive returns.
2.C
Since the bank has entered into the forward rate agreement to receive payment, and interest rates have increased, it will have to pay on the contract. The amount it will have to pay is (0.0335 – 0.0362)($12 million)(0.25) = –$8,100.
3.A
Equity index falling 1% in one day is not unusual based upon historical data.
4.B
In the event of default. the most that the buyer of a credit default swap can receive is the par value of the instrument.
5.D
The company faces right-way risk since the euro exposure is partially hedged (it pays euros on its debt but receives euros from sales).
risk-neutral mean loss rate = 1-80 1100 = 20%
mean loss rate = PD LGD = (0.2) (1-0.6) = 8%
6.B
The value relationship is discontinuous near the barrier, so hedge ratios are very unstable at that level.