[ 2009 FRM Sample Exam ] Operational and Integrated risk management Q10 management, commercial, following, interest, average

Abey

 

10. Under the Internal ratings-based approach of the Basel II accord for securitization exposures, an Asset-backed commercial paper's (ABCP), which of the following does 'Thickness of exposure' refer to?

A. The average 'number of years' the bank has been associated with the borrower as a lender.

B. It is the ratio of the 'nominal size of the tranche of interest' to 'the notional amount of exposures' in the pool.

C. It is the ratio of the 'amount of all securitization exposures subordinate to the tranche in question' to 'the amount of exposures in the pool'.

D. The average 'amount' of the exposure (international) to the group of borrowers in the pool converted to Euros.

Abey

 

Correct answer is Bfficeffice" />

A is incorrect as it is not the correct definition, as per Basel II accord.

B is correct, as it is the correct definition, as per Basel II accord.

C is incorrect as it is not the correct definition, as per Basel II accord.

D is incorrect as it is not the correct definition, as per Basel II accord.