Treasury Risk Management MCQ: CAIIB BFM Unit 23 Module C

Treasury Risk Management MCQ: CAIIB BFM Unit 23 Module C. These 58 multiple-choice questions will help you learn about the different types of risks banks face, like market risk and credit risk.

Treasury Risk Management MCQ: CAIIB BFM Unit 23 Module C – Attempt Now!

Question 1: What is a key function of treasury that inherently involves market risk?

A. Processing trade settlements.
B. Profiting from market opportunities.
C. Managing employee salaries.
D. Ensuring basic compliance.

Show Explanation

Correct Answer: B. Profiting from market opportunities. Treasury functions often involve taking positions in financial markets to generate profits, which exposes them to market fluctuations.

Question 2: Besides market risk, what other type of risk does treasury primarily manage that arises from other banking activities?

A. Operational risk.
B. Compliance risk.
C. Balance sheet risk.
D. Reputational risk.

Show Explanation

Correct Answer: C. Balance sheet risk. Treasury plays a crucial role in managing the risks associated with a bank’s assets and liabilities.

Question 3: What is a potential negative consequence of using high leverage in treasury operations?

A. Reduced transaction sizes.
B. Magnified potential losses.
C. Slower market loss realization.
D. Increased operational efficiency.

Show Explanation

Correct Answer: B. Magnified potential losses. High leverage amplifies both potential gains and potential losses in treasury activities.

Question 4: Why can single errors in treasury transactions lead to substantial financial losses?

A. Treasury staff are often inexperienced.
B. Transaction sizes in treasury are typically very large.
C. Regulatory oversight of treasury is minimal.
D. Treasury systems are prone to frequent failures.

Show Explanation

Correct Answer: B. Transaction sizes in treasury are typically very large. The large volumes handled by treasury mean even small errors can result in significant monetary losses.

Question 5: What is a characteristic of market losses in treasury that emphasizes the need for strong risk management?

A. They usually materialize slowly.
B. Trades are always reversible.
C. They can materialize quickly, and trades are often irreversible.
D. They have a limited impact on the overall financial institution.

Show Explanation

Correct Answer: C. They can materialize quickly, and trades are often irreversible. The rapid nature of market movements and the difficulty in reversing trades necessitate robust risk controls in treasury.

Question 6: Which of the following best describes market risk in the context of treasury?

A. The risk of errors in trade processing.
B. The risk of a counterparty failing to meet obligations.
C. The potential loss due to unfavorable changes in market prices.
D. The risk of not having enough funds to meet payment obligations.

Show Explanation

Correct Answer: C. The potential loss due to unfavorable changes in market prices. Market risk directly relates to fluctuations in exchange rates, interest rates, and security prices.

Question 7: What does the term “volatility” refer to in the context of financial markets?

A. The volume of trading activity.
B. The number of participants in the market.
C. The degree of variation or fluctuation in market prices.
D. The overall stability of the market.

Show Explanation

Correct Answer: C. The degree of variation or fluctuation in market prices. Volatility indicates how much and how quickly market prices change.

Question 8: What is the primary concern associated with funding or liquidity risk in treasury?

A. Losses due to adverse market movements.
B. Inability to meet payment or settlement obligations when due.
C. Failure of a counterparty to deliver on a trade.
D. Errors in the processing of transactions.

Show Explanation

Correct Answer: B. Inability to meet payment or settlement obligations when due. Funding or liquidity risk focuses on having sufficient liquid assets to cover liabilities.

Question 9: What is the main goal of Asset Liability Management (ALM) in a financial institution?

A. To maximize trading profits in the short term.
B. To manage risks arising from mismatches between assets and liabilities.
C. To ensure compliance with all regulatory requirements.
D. To minimize operational costs within the treasury department.

Show Explanation

Correct Answer: B. To manage risks arising from mismatches between assets and liabilities. ALM specifically addresses interest rate and liquidity risks stemming from the balance sheet structure.

Question 10: What are the three main functional areas typically found in a standard treasury structure?

A. Trading, Accounting, Audit.
B. Front Office, Back Office, Mid Office.
C. Sales, Marketing, Operations.
D. Management, Supervision, Execution.

Show Explanation

Correct Answer: B. Front Office, Back Office, Mid Office. This structure provides a framework for managing different aspects of treasury operations.

Question 11: Which department within treasury is primarily responsible for executing trades?

A. Back Office.
B. Mid Office.
C. Front Office.
D. Compliance Department.

Show Explanation

Correct Answer: C. Front Office. The Front Office is the dealing or trading arm of the treasury.

Question 12: Which of the following is a key responsibility of the Back Office in treasury operations?

A. Risk management and monitoring.
B. Executing buy and sell orders.
C. Trade confirmation and settlement.
D. Valuation of financial instruments.

Show Explanation

Correct Answer: C. Trade confirmation and settlement. The Back Office handles the post-trade processing and administrative tasks.

Question 13: Which department in treasury is typically responsible for risk management and compliance monitoring?

A. Front Office.
B. Back Office.
C. Mid Office.
D. Internal Audit.

Show Explanation

Correct Answer: C. Mid Office. The Mid Office plays a crucial role in overseeing and controlling risks within the treasury function.

Question 14: What is a critical principle regarding the segregation of duties between the Front Office and the Back Office in treasury?

A. They should collaborate closely on all tasks.
B. Their functions must be strictly separated to prevent conflicts of interest.
C. Back Office staff should report to the Head of Front Office.
D. Front Office can handle settlement during peak periods.

Show Explanation

Correct Answer: B. Their functions must be strictly separated to prevent conflicts of interest. This separation is a fundamental control to reduce the risk of fraud and errors.

Question 15: To whom should the Mid Office ideally report to ensure its independence in risk management?

A. Head of Front Office.
B. Head of Back Office.
C. Chief Risk Officer (CRO) or a higher authority.
D. Head of Treasury Operations.

Show Explanation

Correct Answer: C. Chief Risk Officer (CRO) or a higher authority. Independent reporting ensures that risk management functions are not unduly influenced by trading pressures.

Question 16: What are position limits in treasury designed to control?

A. Operational errors.
B. Market risk exposure.
C. Counterparty default risk.
D. Settlement delays.

Show Explanation

Correct Answer: B. Market risk exposure. Position limits restrict the size of trades and open positions to limit potential losses from market movements.

Question 17: What does NOOPL stand for in the context of foreign exchange limits?

A. Net Overall Operating Profit Limit.
B. Net Open Overnight Position Limit.
C. Net Outward Payment Obligation Limit.
D. Nominal Outflow and Inflow Position Limit.

Show Explanation

Correct Answer: B. Net Open Overnight Position Limit. NOOPL is an aggregate limit on the net exposure to different currencies.

Question 18: What is the regulatory capital requirement for foreign exchange risk in India, based on the higher of NOOPL or the actual outstanding net open position?

A. 5%.
B. 7%.
C. 9%.
D. 11%.

Show Explanation

Correct Answer: C. 9%. This is a specific regulatory requirement to cover potential losses from foreign exchange fluctuations.

Question 19: Which of the following is an example of a limit typically included under securities trading limits?

A. Maximum number of employees in the trading room.
B. Limit on the size of a single security deal.
C. Minimum brokerage fees payable per trade.
D. Maximum number of trades allowed per day.

Show Explanation

Correct Answer: B. Limit on the size of a single security deal. Securities trading limits aim to control the amount invested in specific securities or issuers.

Question 20: What is the purpose of a stop-loss limit in treasury operations?

A. To maximize potential profits from trading.
B. To automatically execute trades at the best available price.
C. To trigger mandatory closing of a position if a predetermined loss threshold is breacheD.
D. To delay the settlement of loss-making trades.

Show Explanation

Correct Answer: C. To trigger mandatory closing of a position if a predetermined loss threshold is breached. Stop-loss limits are designed to cap potential losses.

Question 21: How are stop-loss levels typically monitored for trading positions?

A. Using historical transaction costs.
B. Using Mark-to-Market (MTM) valuations.
C. Based on the initial investment amount.
D. Through daily reconciliation of bank accounts.

Show Explanation

Correct Answer: B. Using Mark-to-Market (MTM) valuations. MTM reflects the current market value of the position, allowing for real-time monitoring of losses.

Question 22: Besides MTM, what other measures might be used to set stop-loss limits for securities trading?

A. Inflation rates and GDP growth.
B. Value at Risk (VaR) or duration measures.
C. Political stability and investor sentiment.
D. Company’s annual revenue and profit.

Show Explanation

Correct Answer: B. Value at Risk (VaR) or duration measures. These are more sophisticated risk metrics used for managing potential losses in securities portfolios.

Question 23: What is the primary purpose of setting exposure ceiling limits for counterparties in treasury?

A. To increase trading volume with all available parties.
B. To control Credit Risk (Default Risk) and Settlement Risk.
C. To ensure that all counterparties pay the same transaction fees.
D. To comply with general banking regulations.

Show Explanation

Correct Answer: B. To control Credit Risk (Default Risk) and Settlement Risk. These limits manage the risk of a counterparty failing to meet their obligations.

Question 24: What is the risk that a counterparty will fail to meet its repayment obligations called?

A. Liquidity risk.
B. Market risk.
C. Default risk.
D. Operational risk.

Show Explanation

Correct Answer: C. Default risk. This is the risk that the other party in a transaction will not fulfill their financial commitments.

Question 25: What is the risk that a counterparty fails to deliver securities or funds after the first party has already done so?

A. Interest rate risk.
B. Settlement risk.
C. Foreign exchange risk.
D. Compliance risk.

Show Explanation

Correct Answer: B. Settlement risk. This risk arises during the process of exchanging assets and payments.

Question 26: How often should counterparty limits in treasury typically be reviewed?

A. Monthly.
B. Quarterly.
C. At least annually.
D. Only when a counterparty’s rating changes.

Show Explanation

Correct Answer: C. At least annually. Regular review ensures that the limits remain appropriate based on the counterparty’s financial health and market conditions.

Question 27: Which of the following is a settlement risk mitigation technique used in treasury?

A. Increasing transaction fees.
B. Delivery vs. Payment (DvP).
C. Reducing the number of counterparties.
D. Delaying the settlement process.

Show Explanation

Correct Answer: B. Delivery vs. Payment (DvP). DvP ensures that the transfer of securities occurs only if the payment occurs simultaneously.

Question 28: What does the term “Leverage” refer to in the context of treasury and investments?

A. The total value of assets held by the treasury.
B. Using borrowed funds to potentially increase investment returns.
C. The number of employees working in the treasury department.
D. The speed at which transactions are processed.

Show Explanation

Correct Answer: B. Using borrowed funds to potentially increase investment returns. Leverage can amplify both profits and losses.

Question 29: What is the definition of Market Risk in the context of banking?

A. The risk of losses due to operational failures.
B. The risk of losses in bank positions due to adverse movements in market prices/rates.
C. The risk of a borrower failing to repay a loan.
D. The risk of not having enough cash to meet immediate obligations.

Show Explanation

Correct Answer: B. The risk of losses in bank positions due to adverse movements in market prices/rates. Market risk is specifically related to fluctuations in market variables.

Question 30: Which of the following is NOT considered a key market variable that contributes to market risk?

A. Equity prices.
B. Interest rates.
C. Employee salaries.
D. Currency exchange rates.

Show Explanation

Correct Answer: C. Employee salaries. Employee salaries are an operational expense, not a market variable that directly drives market risk.

Question 31: Market risk is also commonly referred to as what other type of risk?

A. Credit Risk.
B. Operational Risk.
C. Price Risk.
D. Liquidity Risk.

Show Explanation

Correct Answer: C. Price Risk. Market risk arises from changes in the prices of financial instruments and commodities.

Question 32: Which of the following is a major component of Market Risk?

A. Regulatory Risk.
B. Compliance Risk.
C. Liquidity Risk.
D. Reputational Risk.

Show Explanation

Correct Answer: C. Liquidity Risk. Liquidity risk is a significant aspect of overall market risk.

Question 33: What is the primary cause of Liquidity Risk for a financial entity?

A. Decreasing interest rates.
B. Adverse movements in stock prices.
C. Mismatches in cash inflows/outflows or unexpected funding needs.
D. Changes in foreign exchange rates.

Show Explanation

Correct Answer: C. Mismatches in cash inflows/outflows or unexpected funding needs. Liquidity risk stems from the inability to meet short-term cash obligations.

Question 34: What is the risk of loss due to unfavorable changes in interest rates known as?

A. Currency Risk.
B. Equity Risk.
C. Interest Rate Risk.
D. Commodity Risk.

Show Explanation

Correct Answer: C. Interest Rate Risk. This risk is specifically related to the impact of interest rate fluctuations on financial positions.

Question 35: How does Interest Rate Risk affect a bank’s net interest income?

A. By increasing the demand for loans.
B. Through repricing risk arising from asset-liability maturity mismatches.
C. By decreasing the cost of deposits.
D. By having no direct impact on net interest income.

Show Explanation

Correct Answer: B. Through repricing risk arising from asset-liability maturity mismatches. Changes in interest rates can affect the rates at which assets and liabilities are repriced, impacting net interest income.

Question 36: How does Interest Rate Risk affect the market value of fixed-income assets?

A. By increasing their value when interest rates rise.
B. Through price risk, where value decreases when interest rates rise.
C. By having no impact on their market value.
D. By making them more liquid.

Show Explanation

Correct Answer: B. Through price risk, where value decreases when interest rates rise. Bond prices and interest rates have an inverse relationship.

Question 37: What is Currency Risk also known as?

A. Inflation Risk.
B. Exchange Rate Risk.
C. Sovereign Risk.
D. Transaction Risk.

Show Explanation

Correct Answer: B. Exchange Rate Risk. Currency risk arises from fluctuations in the value of one currency relative to another.

Question 38: What primarily causes Currency Risk for a bank?

A. Changes in domestic interest rates.
B. Unfavorable movements in foreign exchange rates.
C. Fluctuations in the price of golD.
D. Decreases in the value of domestic equities.

Show Explanation

Correct Answer: B. Unfavorable movements in foreign exchange rates. Currency risk directly impacts positions held in foreign currencies.

Question 39: How is Currency Risk linked to Interest Rate Risk?

A. They are completely independent of each other.
B. Forward exchange rates reflect interest rate differentials between currencies.
C. Higher interest rates always lead to a stronger domestic currency.
D. Lower interest rates always lead to a weaker domestic currency.

Show Explanation

Correct Answer: B. Forward exchange rates reflect interest rate differentials between currencies. Interest rate parity is a key concept linking these two risks.

Question 40: What type of risk arises from changes in the prices of stocks?

A. Commodity Risk.
B. Interest Rate Risk.
C. Equity Risk.
D. Currency Risk.

Show Explanation

Correct Answer: C. Equity Risk. This risk is specific to investments in the stock market.

Question 41: What type of risk is associated with changes in the prices of raw materials like gold?

A. Equity Risk.
B. Interest Rate Risk.
C. Commodity Risk.
D. Liquidity Risk.

Show Explanation

Correct Answer: C. Commodity Risk. This risk pertains to the volatility in the prices of commodities.

Question 42: How does market risk directly impact a bank’s treasury operations?

A. By increasing the number of regulatory inspections.
B. By affecting treasury profitability and transaction values.
C. By reducing the need for risk management processes.
D. By simplifying accounting procedures.

Show Explanation

Correct Answer: B. By affecting treasury profitability and transaction values. Treasury deals with financial instruments whose values are subject to market fluctuations.

Question 43: What is the role of treasury in relation to the bank’s overall Asset-Liability Management (ALM) process concerning market risk?

A. Treasury operates completely independently of ALM.
B. Treasury manages market risk and provides inputs to the ALM process.
C. ALM dictates all trading strategies for the treasury.
D. Treasury only focuses on operational aspects, not risk management.

Show Explanation

Correct Answer: B. Treasury manages market risk and provides inputs to the ALM process. Treasury’s market activities are a key component of the bank’s overall balance sheet management.

Question 44: What primarily influences market movements in financial markets?

A. Government regulations alone.
B. Only the actions of central banks.
C. Market participants’ expectations (speculation) about future rate/price changes.
D. Random and unpredictable events.

Show Explanation

Correct Answer: C. Market participants’ expectations (speculation) about future rate/price changes. Market psychology and anticipated future conditions play a significant role.

Question 45: What is Value at Risk (VaR)?

A. A method to guarantee profits in trading.
B. A statistical measure estimating the maximum potential loss over a specific period for a given confidence level.
C. A regulatory requirement that all banks must meet.
D. A tool to predict the exact amount of loss in any scenario.

Show Explanation

Correct Answer: B. A statistical measure estimating the maximum potential loss over a specific period for a given confidence level. VaR helps quantify potential downside risk.

Question 46: What does a 99% confidence level in VaR imply?

A. There is a 99% chance of making a profit.
B. There is a 1% chance of losing more than the VaR amount.
C. The maximum possible loss is guaranteed to be the VaR amount.
D. Losses will never exceed the VaR amount.

Show Explanation

Correct Answer: B. There is a 1% chance of losing more than the VaR amount. The confidence level indicates the probability of losses not exceeding the VaR.

Question 47: Under what market conditions does VaR primarily aim to quantify potential losses?

A. During extreme financial crises.
B. Under normal market conditions.
C. Only during periods of high volatility.
D. When there are no market movements.

Show Explanation

Correct Answer: B. Under normal market conditions. VaR is designed to estimate losses within typical market fluctuations.

Question 48: Which of the following is a common approach used to calculate VaR?

A. Fundamental Analysis.
B. Technical Analysis.
C. Historical Simulation.
D. Ratio Analysis.

Show Explanation

Correct Answer: C. Historical Simulation. This method uses past market data to simulate potential future losses.

Question 49: What does the Parametric VaR approach primarily rely on for its calculation?

A. Actual historical profit and loss data.
B. Statistical volatility (standard deviation) and the assumption of a normal distribution of returns.
C. Expert opinions and subjective assessments.
D. Real-time market prices and trading volumes.

Show Explanation

Correct Answer: B. Statistical volatility (standard deviation) and the assumption of a normal distribution of returns. This approach uses statistical parameters to estimate VaR.

Question 50: For what time horizons is VaR often calculated?

A. Long-term horizons like 1 year or more.
B. Short horizons like 1-day or 10-days.
C. Only for the duration of a specific trading strategy.
D. Only at the end of each financial quarter.

Show Explanation

Correct Answer: B. Short horizons like 1-day or 10-days. VaR is typically used for short-term risk assessment.

Question 51: According to the approximate time conversion formula, if the Daily VaR is ₹10 million, what is the approximate VaR for 4 days?

A. ₹10 million.
B. ₹20 million.
C. ₹40 million.
D. ₹80 million.

Show Explanation

Correct Answer: B. ₹20 million. VaR for ‘n’ days ≈ Daily VaR × $\sqrt{n}$. So, VaR for 4 days ≈ ₹10 million × $\sqrt{4}$ = ₹10 million × 2 = ₹20 million.

Question 52: What is the purpose of back-testing in the context of VaR?

A. To predict future market movements with certainty.
B. To compare predicted VaR with actual profit/loss to assess the model’s accuracy.
C. To adjust trading positions based on daily market fluctuations.
D. To ensure compliance with accounting standards.

Show Explanation

Correct Answer: B. To compare predicted VaR with actual profit/loss to assess the model’s accuracy. Back-testing helps validate the effectiveness of the VaR model.

Question 53: What does Duration measure in the context of bonds?

A. The total amount of interest earned on a bond.
B. The time until a bond matures.
C. The sensitivity of a bond’s price to changes in interest rates.
D. The creditworthiness of the bond issuer.

Show Explanation

Correct Answer: C. The sensitivity of a bond’s price to changes in interest rates. Duration quantifies how much a bond’s price might change with interest rate movements.

Question 54: What is Yield to Maturity (YTM) of a bond?

A. The coupon rate stated on the bond certificate.
B. The current market price of the bond.
C. The total anticipated return if the bond is held until maturity.
D. The profit made if the bond is sold before maturity.

Show Explanation

Correct Answer: C. The total anticipated return if the bond is held until maturity. YTM is a key measure of a bond’s return.

Question 55: What is the relationship between bond prices and changes in yield (interest rates)?

A. Bond prices move in the same direction as yield changes.
B. Bond prices move inversely to changes in yield.
C. Bond prices are not affected by changes in yielD.
D. The relationship is unpredictable.

Show Explanation

Correct Answer: B. Bond prices move inversely to changes in yield. When interest rates rise, bond prices typically fall, and vice versa.

Question 56: What does Macaulay Duration represent?

A. The percentage change in a bond’s price for a 1% change in yield.
B. The total return an investor will receive if they hold the bond until maturity.
C. The weighted average maturity of a bond’s cash flows, expressed in years.
D. The current market price of the bond divided by its face value.

Show Explanation

Correct Answer: C. The weighted average maturity of a bond’s cash flows, expressed in years. Macaulay Duration provides a time-based measure of a bond’s interest rate sensitivity.

Question 57: For a zero-coupon bond, what is equal to its Macaulay Duration?

A. Its yield to maturity.
B. Its coupon rate.
C. Its time to maturity.
D. Its modified duration.

Show Explanation

Correct Answer: C. Its time to maturity. Since a zero-coupon bond only pays at maturity, the weighted average time to receive cash flows is simply the maturity period.

Question 58: What does Modified Duration (MD) estimate?

A. The total interest earned over the life of the bond.
B. The exact change in a bond’s price for any change in yield.
C. The percentage change in a bond’s price for a 1% change in its yielD.
D. The time it takes for an investor to recover their initial investment.

Show Explanation

Correct Answer: C. The percentage change in a bond’s price for a 1% change in its yield. Modified Duration is a practical measure of price sensitivity.

Treasury Risk Management MCQ: CAIIB BFM Unit 23 Module C – Attempt Now!

Question 1: What is a key function of treasury that inherently involves market risk?

Question 2: Besides market risk, what other type of risk does treasury primarily manage that arises from other banking activities?

Question 3: What is a potential negative consequence of using high leverage in treasury operations?

Question 4: Why can single errors in treasury transactions lead to substantial financial losses?

Question 5: What is a characteristic of market losses in treasury that emphasizes the need for strong risk management?

Question 6: Which of the following best describes market risk in the context of treasury?

Question 7: What does the term “volatility” refer to in the context of financial markets?

Question 8: What is the primary concern associated with funding or liquidity risk in treasury?

Question 9: What is the main goal of Asset Liability Management (ALM) in a financial institution?

Question 10: What are the three main functional areas typically found in a standard treasury structure?

Question 11: Which department within treasury is primarily responsible for executing trades?

Question 12: Which of the following is a key responsibility of the Back Office in treasury operations?

Question 13: Which department in treasury is typically responsible for risk management and compliance monitoring?

Question 14: What is a critical principle regarding the segregation of duties between the Front Office and the Back Office in treasury?

Question 15: To whom should the Mid Office ideally report to ensure its independence in risk management?

Question 16: What are position limits in treasury designed to control?

Question 17: What does NOOPL stand for in the context of foreign exchange limits?

Question 18: What is the regulatory capital requirement for foreign exchange risk in India, based on the higher of NOOPL or the actual outstanding net open position?

Question 19: Which of the following is an example of a limit typically included under securities trading limits?

Question 20: What is the purpose of a stop-loss limit in treasury operations?

Question 21: How are stop-loss levels typically monitored for trading positions?

Question 22: Besides MTM, what other measures might be used to set stop-loss limits for securities trading?

Question 23: What is the primary purpose of setting exposure ceiling limits for counterparties in treasury?

Question 24: What is the risk that a counterparty will fail to meet its repayment obligations called?

Question 25: What is the risk that a counterparty fails to deliver securities or funds after the first party has already done so?

Question 26: How often should counterparty limits in treasury typically be reviewed?

Question 27: Which of the following is a settlement risk mitigation technique used in treasury?

Question 28: What does the term “Leverage” refer to in the context of treasury and investments?

Question 29: What is the definition of Market Risk in the context of banking?

Question 30: Which of the following is NOT considered a key market variable that contributes to market risk?

Question 31: Market risk is also commonly referred to as what other type of risk?

Question 32: Which of the following is a major component of Market Risk?

Question 33: What is the primary cause of Liquidity Risk for a financial entity?

Question 34: What is the risk of loss due to unfavorable changes in interest rates known as?

Question 35: How does Interest Rate Risk affect a bank’s net interest income?

Question 36: How does Interest Rate Risk affect the market value of fixed-income assets?

Question 37: What is Currency Risk also known as?

Question 38: What primarily causes Currency Risk for a bank?

Question 39: How is Currency Risk linked to Interest Rate Risk?

Question 40: What type of risk arises from changes in the prices of stocks?

Question 41: What type of risk is associated with changes in the prices of raw materials like gold?

Question 42: How does market risk directly impact a bank’s treasury operations?

Question 43: What is the role of treasury in relation to the bank’s overall Asset-Liability Management (ALM) process concerning market risk?

Question 44: What primarily influences market movements in financial markets?

Question 45: What is Value at Risk (VaR)?

Question 46: What does a 99% confidence level in VaR imply?

Question 47: Under what market conditions does VaR primarily aim to quantify potential losses?

Question 48: Which of the following is a common approach used to calculate VaR?

Question 49: What does the Parametric VaR approach primarily rely on for its calculation?

Question 50: For what time horizons is VaR often calculated?

Question 51: According to the approximate time conversion formula, if the Daily VaR is ₹10 million, what is the approximate VaR for 4 days?

Question 52: What is the purpose of back-testing in the context of VaR?

Question 53: What does Duration measure in the context of bonds?

Question 54: What is Yield to Maturity (YTM) of a bond?

Question 55: What is the relationship between bond prices and changes in yield (interest rates)?

Question 56: What does Macaulay Duration represent?

Question 57: For a zero-coupon bond, what is equal to its Macaulay Duration?

Question 58: What does Modified Duration (MD) estimate?

Related Posts

Leave a Comment Cancel Reply