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Updated: May 30, 2026
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1. In setting confidence levels for VaR estimates for internal limit setting, it is generally desirable:
A) that actual losses exceed the VaR estimates on only the rarest of occasions
B) that actual losses exceed the VaR estimates with some reasonably observable frequency that is neither too high nor too low
C) that actual losses very frequently exceed the VaR estimates
D) that actual losses never exceed the VaR estimates
2. Which of the following credit risk models considers debt as including a put option on the firm's assets to assess credit risk?
A) The contingent claims approach
B) CreditPortfolio View
C) The actuarial approach
D) The CreditMetrics approach
3. For an investor with a long position in market index futures, which of the following is a primary risk:
A) Basis risk between futures and spot prices
B) Increase or decrease in the level of the underlying index
C) Risk that expected dividends will differ from realized dividend yields
D) Movement in interest rates underlying the futures prices
4. Which of the following formulae correctly describes Component VaR. (p refers to the portfolio, and i is the i- th constituent of the portfolio. MVaR means Marginal VaR, and other symbols have their usual meanings.)
A) I and II
B) II
C) I
D) III
5. Altman's Z-score does not consider which of the following ratios:
A) Net income to total assets
B) Market capitalization to debt
C) Sales to total assets
D) Working capital to total assets
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: A | Question # 3 Answer: B | Question # 4 Answer: A | Question # 5 Answer: A |
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