Q163. Which one of the four following statements about consortium databases is correct?
Consortium databases

Q164. Which one of the following four statements best describes challenges of delta-normal method of mapping
options positions?
Delta-normal method understates

Q165. Which of the following statements about the option gamma is correct? Gamma is the
I. Second derivative of the option value with respect to the volatility.
II. Percentage change in option value per percentage change in the price of the underlying instrument.
III. Second derivative of the value function with respect to the price of the underlying instrument.
IV. Rate of change of the option delta with respect to changes in the underlying price.

Q166. Which one of the four following statements describes a specific characteristic of risk and control
self-assessments (RCSA) which distinguishes it from both control assessments and risk and control
assessments?

Q167. AlphaBank’s management is evaluating how changes in its business environment could materially impact risk
categories. As a result, bank’s management decides to implement the structure, which facilitates the discussion
in an integrative context, spanning market, credit, and operational risk factors, and encourages transparency
and communication between risk disciplines. Which one of the following four approaches should the
management choose to achieve this strategic goal?

Q168. Samuel Teng owns a portfolio of bonds and is trying to compute the convexity of his portfolio. Which of the
following choices equals the convexity of Samuel’s portfolio?

Q169. As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in
value against other currencies.

Q170. A credit portfolio manager analyzes a large retail credit portfolio. Which of the following factors will represent
typical disadvantages of market-linked credit risk drivers?
I. Need to supply a large number of input parameters to the model
II. Slow computation speed due to higher simulation complexity
III. Non-linear nature of the model applicable to a specific type of credit portfolios
IV. Need to estimate a large number of unknown variable and use approximations

Q171. Which one of the four following statements regarding foreign exchange (FX) swap transactions is
INCORRECT?

Q172. A risk manager is considering how to best quantify option price dynamics using mathematical option pricing
models. Which of the following variables would most likely serve as an input in these models?
I. Implicit parameter estimate based on observed market prices
II. Estimates of sensitivity of option prices to parameter changes
III. Theoretical option determination based on assumptions

Q173. Interest rate swaps are:

Q174. Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest
income, Beta Insurance Company should invest in bonds with which of the following ratings?

Q175. Which one of the following four statements about preferred shares is INCORRECT?

Q176. To reduce the variability of net interest income, Gamma Bank can swap positions that make its duration gap
equal to

Q177. On January 1, 2010 the TED (treasury-euro dollar) spread was 0.9%, and on January 31, 2010 the TED spread
is 0.4%. As a risk manager, how would you interpret this change?

Q178. Which one of the following four global markets for financial assets or instruments is widely believed to be the
most liquid?

Q179. US-based BetaBank have accumulated Japanese yen, Japanese government bonds, options on Japanese yen,
and positions in commodities that have a positive correlation with yen. Which one of the four following
non-statistical risk measures could be used to evaluate the BetaBank’s exposure to the Japanese economy?

Q180. Which one of the following four models is typically used to grade the obligations of small- and medium-size
enterprises?

Q181. By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following
outcomes EXCEPT:

Q182. Which one of the following four exotic option types has another option as its underlying asset, and as a result
of its construction is generally believed to be very difficult to model?

Q183. When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are
increasing as the stigma of default evaporates, and more borrowers default. This phenomenon constitutes